The Reserve Bank of Australia (RBA) has hiked interest rates by another 0.25 per cent, bringing the official cash rate to 2.60 per cent.
This is the sixth time the central bank has hiked the cash rate in as many months, since it was at a record low 0.1 per cent in April.
RBA governor Philip Lowe acknowledged that while inflation is an ongoing issue, the bank felt that it wanted to slow-down on super-sized hikes to see their impact on the economy.
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“The cash rate has been increased substantially in a short period of time,” Lowe said.
“Reflecting this, the board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.”
The vast majority of economists had been predicting another 0.5 per cent increase this month.
What will the rate hike cost?
Head of consumer research at Finder Graham Cooke said Aussies with a $500,000 mortgage will be paying almost $9,000 more a year in interest compared to just 6 months ago.
“Australians with a $500,000 mortgage will be forking out $735 more per month compared to what they were paying in April,” Cooke said.
Analysis from RateCity.com.au found that for an owner-occupier with a $500,000 debt at the start of the hikes, and 25 years remaining on their loan, the total increase to their monthly repayments would be $687 since May.
For someone with $750,000 remaining on their loan, their monthly repayments would have risen by $1,030 since May.
And for someone with $1 million left on their loan, the monthly repayment would have risen $1,374 since May.
How high will interest rates go?
It’s hard to say as the RBA makes a decision on the day based on the data available to them, so things can change.
However, economists from the Big Four banks have made predictions about where interest rates will go.
Big Four bank cash rate forecasts:
CBA: rates will peak at 2.85 per cent in November. Two 0.25 per cent cuts in August and November 2023.
Westpac: rates will peak at 3.60 per cent in February 2023. Four 0.25 per cent cuts in 2024.
NAB: rates will peak at 3.10 per cent in November.
ANZ: rates will peak at 3.35 per cent in December. Two 0.25 per cent cuts in 2024.