After much speculation, the Reserve Bank of Australia (RBA) has officially announced it has increased the cash rate 25 basis points from 0.1 per cent to 0.35 per cent.
This is the first rate rise since November 2010, and comes as Australian consumer prices rose 5.1% year-on-year in the first quarter of 2022 and core inflation rose to 3.7 percent.
According to RBA Governor Philip Lowe:
“The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic. The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.”
The rise is expected to be the first in a series of increases in 2022. Economists predict that the cash rate could climb every month until December, with interest rates potentially hitting 2.5 per cent by the end of 2022.
These rate changes will also affect house price growth, which has already slowed amidst predictions that a rate hike was on the horizon. A change in cash rates could see borrowers need to increase their monthly repayments by hundreds or even thousands of dollars. However, banks have yet to announce how they are going to respond to the rate hike and if they will mirror RBA cash hikes in full.
Ultimately, with rates on the upswing, it’s even more important for borrowers to give their mortgage a health check and seek the sharpest home loan rate on the market. If you’re planning to buy a home or looking to refinance, contact us today to see how we can help you lock in the best rate for your loan.
