RBA Raises Cash Rate to 4.85%, Highest Since 2008, in 6-3 Vote
Australian mortgage holders face higher repayments after the Reserve Bank of Australia raised its cash rate to 4.85% on Tuesday, the highest level since 2008.
Australian mortgage holders face higher repayments after the Reserve Bank of Australia raised its cash rate to 4.85% on Tuesday, the highest level since 2008. The increase was the bank’s fifth this year, approved by six board members while three voted to hold rates steady.
The 25-basis-point rise takes the rate from 4.60% and comes as the RBA expects inflation to remain above its 2% to 3% target range longer than previously forecast. For households, the immediate impact will depend on how lenders pass on the increase.
Repayments set to rise
Canstar estimates that a borrower with a A$500,000 mortgage could pay about A$77 more each month. For a A$1 million loan, the estimated increase is A$153 a month.
A separate estimate puts the additional monthly cost at about A$119 for a A$731,000 mortgage, equivalent to the national average new owner-occupier loan, if lenders pass on the full increase.
That is a sharper squeeze for borrowers. Savers with high-interest accounts, however, could earn more interest if banks lift deposit rates.
Inflation outlook behind the move
The RBA said inflation remains elevated and broadly based, with a growing risk that expectations of higher prices become embedded. It now expects inflation to return to its target range only in late 2027, roughly three quarters later than previously projected.
The bank’s latest projections put headline inflation at a peak of 4.5% and above 3% until late 2027. The board said tighter financial conditions were warranted in response to the revised outlook and continuing upside risks.
The decision was not unanimous. Six members backed the quarter-point increase; three preferred to keep the cash rate at 4.60%.
The RBA left the door open to further increases but did not explicitly signal another hike. Markets had largely anticipated the move, while the higher inflation forecasts keep further tightening in play. Governor Michele Bullock’s remarks at a news conference are the next signal borrowers and markets will watch.
