Plan for a rate rise: RBA

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on March 11, 2022 Fact Checked
Plan for a rate rise: RBA

Reserve Bank of Australia Governor Dr Philip Lowe has encouraged Australians to prepare for higher interest rates.

Speaking at the Banking 2022 Conference on Friday morning, Dr Lowe said "it would be prudent to plan for an increase".

"The last time the RBA increased the cash rate was in November 2010. That's more than 11 years ago," he said.

"There are a lot of borrowers and I'd say frontline members as well who haven't had any experience at all of a rising interest rate cycle.

"For many borrowers that's going to come as quite an unwelcome development."

However Mr Lowe said it is worth remembering many depositors have a different view and will be "part of the community that will welcome higher interest rates." 

When questioned about the prospect of an official rate rise, Dr Lowe said he felt no pressure from outside the RBA to increase the official cash rate, despite the cacophony of forecasts from major banks.

"I don't feel mounting pressure, each day we [RBA board members} sit down and think whats the right thing to do," Dr Lowe said.

"When we have those discussions we put aside the external noise."

The comments from the RBA Governor follow on from Wednesday's keynote address in which Dr Lowe addressed the cash rate, saying it was 'plausible' there would be a rate hike later this year. 

It also comes a day after RBA deputy governor Guy Debelle announced his resignation after more than 25 years at the central bank.

This is despite being widely tipped to take over the top job after Dr Lowe's term expires in 2023.


Dr Lowe said that with the Term Funding Facility (TFF) coming to an end, the RBA's main focus is now on the level of the cash rate.

The RBA has previously maintained that the cash rate will not rise until inflation and wage growth are 'sustainably' within the 2 to 3% target range, but has since moved away on this not happening until 2024.

"The recent lift in inflation has brought us closer to the point where inflation is sustainably in the target range," Dr Lowe said.

"So too have recent global developments. But we are not yet at that point.

"In underlying terms, inflation has just reached the midpoint of the target band for the first time in over seven years."

While the RBA is yet to raise the official cash rate, lenders have been ramping up home loan interest rate increases in recent months.

Just this week a number of mutual banks increased home loan rates by up to 80 basis points.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 11, 2022. View disclaimer.


Image by Guy Basabose via Unsplash



Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Aaron joined Savings.com.au in 2021. He is a finance journalist with a keen interest in property, the share market, and improving financial literacy in young Australians.

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