Why mortgage holders’ monthly payments are going up
Interest rates were raised to a nearly 15-year high by the Reserve Bank, spelling more pain for mortgage holders.
WHAT’S HAPPENING TO MORTGAGE REPAYMENTS?
* The Reserve Bank of Australia (RBA) has lifted its cash rate, or interest rate, from 4.35 to 4.6 per cent – the highest in nearly 15 years
* For the national median mortgage of $731,000, monthly interest repayments will be about $450 more expensive compared to February
* This is the fourth time the RBA has raised interest rates in 2026, having started the year at 3.6 per cent
* Assuming banks pass the whole increase onto mortgage holders, Australia’s average owner-occupied variable interest rate will jump to 6.49 per cent
WHY ARE THEY GOING UP?
* Lifting interest rates means it’s more expensive for banks to borrow money from each other, and they usually pass all that extra cost onto mortgage holders by raising interest on their loans
* The RBA is essentially hitting the brakes on the economy by making money pricier, slowing down rising costs, or inflation
* Conflict in the Middle East is pushing the price of fuel and other goods, and therefore inflation, up across the economy
* Growth in AI-related demand was also mentioned in the RBA’s statement accompanying Tuesday’s decision
* The labour market, house prices, growth in consumer spending and new mortgages have all softened recently, indicating inflation is on the way down, but that hasn’t been enough so far to mollify the Reserve Bank boffins
* The RBA is also hedging due to uncertainty around the Middle East conflict, which has no end in sight and could still push inflation higher than forecast
WHAT NEXT?
* Inflation data, a key driver of the RBA’s decision-making, will be released by the Australian Bureau of Statistics on Wednesday
* The bank also flagged more hikes could be on the way in its Tuesday statement
* Money markets have tipped another rate rise by February and a 50 per cent chance of one more by mid-2027
