This increase from the RBA marks 350 basis points’ worth of tightening to date, pushing the cash rate to its highest level since May 2012.  

AMP Chief Economist Shane Oliver noted the 0.25% increase in the cash rate will add another $95 to the monthly payment on a $600,000 mortgage. 

“This will take the total increase in monthly payments since April 2022 to $1,200 a month or nearly $14,500 a year,” Dr Oliver said.

PropTrack Senior Economist Eleanor Creagh said recent communications from the Reserve Bank surrounding future cash rate increases have been hawkish, despite recent wage price data coming in below expectations.

“However, with the board remaining committed to overcoming the challenge of persistently high inflation, the cash rate has been further increased by 25 basis points as opposed to reverting to the 50 basis point hike that was discussed at last month’s board meeting,” Ms Creagh said. 

The expectation now remains that the cash rate is close to its peak, with a chorus of economists and analysts echoing this view.

“We’re closer to the peak in interest rate tightening than not and if the Reserve Bank hits pause on its tightening cycle later this year, home prices will likely begin to stabilise as some of the uncertainty buyers have experienced with respect to borrowing capacities and mortgage servicing costs reduces," Ms Creagh said. 

CommBank Head of Australian Economics Gareth Aird echoed this sentiment, noting recent data indicates that the RBA may now be tightening policy into an economy that is already showing sufficient signs of softening.

“That is our assessment. But the Board won’t arrive at that conclusion yet," Mr Aird said. 

This is indeed the case, with Dr Philip Lowe noting the Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.

"In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market," Dr Lowe said. 

"The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that."

CommBank economists anticipate the RBA to deliver 50 basis points of cash rate cuts in the fourth quarter of 2023, while Westpac economists forecast seven cash rate cuts throughout 2024 and 2025. 


Advertisement

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

VariableMore details
Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
Online ExclusiveUp To $4K Cashback

loans.com.au – Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)

  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
VariableMore details
Refinance OnlyApply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Refinance OnlyApply In Minutes

Unloan – Variable Rate Home Loan – Refinance Only

  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
VariableMore details
Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Unlimited Redraws

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

  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
VariableMore details
Unlimited RedrawsApply In Minutes
  • Low Deposit (<95% LVR) with No LMI required
  • Unlimited Redraw and additional repayments
  • No Application or ongoing fees
Unlimited RedrawsApply In Minutes

Sucasa – Ultra Low Rate (Variable) - <95% LVR - No LMI (New Purchases)

  • Low Deposit (<95% LVR) with No LMI required
  • Unlimited Redraw and additional repayments
  • No Application or ongoing fees
Important Information and Comparison Rate Warning

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. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. 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 February 28, 2024. View disclaimer.

Image by White.Rainforest via Unsplash





Ready, Set, Buy!


Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!

By subscribing you agree to our privacy policy