The Reserve Bank of Australia (RBA) has hiked the cash rate to 4.10% today, and it looks like the pain might not stop there, with economists predicting a further rate rise in May, keeping homeowners on the edge of their seats.
The RBA raised rates in February this year, in an attempt to tame inflation. At the time, economists predicted that rates might hold steady for at least a few months, but with oil prices soaring—fueled by the ongoing conflict in Iran—it’s forced the bank’s board to act.
At this stage, economists believe we’re in for another 25 basis point hike when the bank meets again in May.
Mortgage holders brace for impact
Needless to say, with cost of living pressures already biting, today’s hike is unwelcome news for variable rate mortgage holders. Canstar research shows that an average mortgage of $600,000 could now cost up to $91 more per month, assuming their lender passes on the latest rate increase in full.
Factoring in the February rate hike, this could mean an increase of $181 per month since January—enough to cover a grocery shop or a month’s worth of streaming subscriptions.
Impact of a 0.25 hike in March on monthly repayments | ||
|---|---|---|
Debt owning | Hike in March | Cumulative increase (Feb + March) |
$600,000 | +$91 | +$181 |
$800,000 | +$121 | +$241 |
$1 million | +$151 | +$301 |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2026 at the RBA average existing customer variable rate. Calculations assume banks pass on the hikes the month after. Changes are to minimum repayments.
Is now the time to lock in a fixed rate?
With more rate rises on the horizon and with petrol prices quite literally soaring, you’re probably wondering if now’s the time to refinance and lock in a fixed rate. However, Canstar data insights director Sally Tindall cautions against jumping the gun.
“If this is you, don’t panic,” says Tindall. “Walk through the decision with a calm and clear head, noting the risks on both sides and the extra rules and restrictions that come with locking in your rate.”
“The cash rate could well rise in coming weeks, but the fallout from the war, if it hits the Australian economy and jobs market hard, could also push the RBA into reverting back to cuts in the not too distant future.”
