The 25 basis point hike marks 250 basis points’ worth of tightening to the cash rate since May.

For homeowners with an average sized mortgage, a 30-year 3.00% p.a. interest rate increasing to 5.5% p.a. over the past six months means paying an extra $861 in monthly interest costs.

The increase to the cash rate comes as a shock to economists, with many expecting the RBA to hike by another 50 basis points in October, although some were open to the possibility of a smaller increase.

PropTrack Senior Economist Eleanor Creagh said the fastest rise to the cash rate since 1994 has seen home prices falling across the country, with prices nationally now sitting 3.35% below their March peak.

“Today’s rate hike will further increase borrowing costs and reduce maximum borrowing capacities, pushing property prices further down,” Ms Creagh said.

“Outside of the housing market, the economy has entered the tightening cycle with strong momentum and although consumer confidence has fallen, the labour market remains tight, the unemployment rate is at a 48-year low, spending is yet to slow, and business conditions remain strong.

“However, the lagged effect of rate rises, large share of variable rate borrowers ahead on repayments and borrowers on fixed terms yet to expire, means many mortgage holders are only now beginning to feel the impact of the initial rises.”

While more rate hikes are expected in the coming months, Ms Creagh predicts the RBA will steady the pace of tightening to a more measured pace. 

PRD Chief Economist Dr Asti Mardiasmo said if previous history is any indication, this could be the last consecutive cash rate increase by the RBA.

“The RBA has a historical pattern of six to seven successive cash rates in past occasions, before holding it steady for a period of time to see how it translates into the economy,” Dr Mardiasmo told Savings.com.au.

“If they increase today that makes it six increases in total so by the RBA historical pattern, we might see a break November onwards, which of course is in time for the Christmas retail period.”

CommBank Head of Australian Economics Gareth Aird echoed a similar sentiment.

“Provided the RBA pauses for at least a few months, when the cash rate is 2.60% or 2.85%, the data will show there is no need to continue to take the policy rate higher," Mr Aird said. 

"The Australian economy is largely in the RBA's hands."

CommBank economists have previously tipped the RBA to cut the cash rate from a peak of 2.60% starting in late 2023, while Westpac and ANZ now expect a peak above 3% with cash rate cuts by mid-2024.


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
Apply 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.
Apply In Minutes

Unloan – Variable Rate Home Loan LVR < 80%

  • 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
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 May 26, 2024. View disclaimer.

Image by Michiel via Pexels