UPDATE: The RBA has announced a 50 basis point increase to the cash rate in July. 

A 25 basis point hike was nearly consensus, however a few economists tipped a 40 basis point hike, which would have brought the cash rate to 0.75%.

The RBA's 50 basis point hike came ahead of expectations and against the odds.

Reserve Bank Governor Dr Philip Lowe cited high inflation as reason for moving ahead of expectations.

"Inflation is expected to increase further, but then decline back towards the 2–3% range next year," Dr Lowe said.

"Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.

"As the global supply-side problems are resolved and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Today's increase in interest rates will assist with the return of inflation to target over time."

This now takes Australia's monetary policy out of emergency status.

"The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed," Dr Lowe said.

The RBA has not adjusted the cash rate target by more than 25 basis points at a single meeting since 2012, and has not increased by more than 25 basis points since February 2000.

AMP Capital chief economist Dr Shane Oliver expects the cash rate to peak at 2.00% or 2.50% by mid-2023.

"Greater sensitivity to higher interest rates will cap how much the RBA ultimately needs to hike by well below market expectations for a cash rate of 4% or more," Dr Oliver said.

"Falling home prices and very weak consumer confidence indicate RBA monetary tightening is already getting traction earlier than in past rate hiking cycles."

Last week, Westpac chief economist Bill Evans said 40 basis points would have been the "right decision" to rein in inflation and take Australia out of emergency stimulus status.

Gareth Aird, CBA's head of Australian economics, previously said the RBA will persist with a 25 basis point hike in June because it does not want to be seen as changing its economic outlook after the federal election.

The RBA is expected to leave 2022 with a cash rate of 1.50% to 1.75%.

PropTrack economist Paul Ryan said despite still being early days, interest rate talk is already weighing on property prices.

"Higher interest rate expectations have weighed on housing price growth across the country in 2022. Housing price growth has slowed significantly, with annual price growth falling from 24% six months ago to only 14% in the year to May," Mr Ryan said.

"This slowdown has particularly affected the most expensive capital markets of Sydney, Melbourne and the ACT, which recorded price falls in May."

See Also: Find a better home loan rate? Tic:Toc will match it.


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.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
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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 . View disclaimer.

Photo by Kate Ausburn on Flickr

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