RBA interest rates: Reserve delivers blow to homeowners after three rounds of relief

The banks are expected to pass today’s hike on to their variable rate mortgage customers, Canstar reckons.

However, while your bank will start charging its customers the higher mortgage rate from this time, they’ll give borrowers plenty of notice before they increase their minimum monthly repayments.

The big four banks provide the following:

• CBA: a minimum of 20 days’ notice.
• Westpac: a minimum of 30 days’ notice.
• NAB: a minimum of 30 days’ notice.
• ANZ: a minimum of 30 days’ notice.

Exactly when a customer’s repayments will rise will also depend on how long it takes the banks to issue the repayment change letter and where the customer is in their billing cycle. This can take up two or three months in some cases.

How to get ahead of a rate hike

Variable rate borrowers don’t just have to accept a higher mortgage rate. These rates are negotiable.

The first port of call for borrowers should be to contact their bank and ask for a rate cut.

What will a good rate now look like?

Once the dust settles on this hike, Canstar estimates:

• 5.77 per cent will be the average owner-occupier variable rate.
• 5.50 per cent will be a competitive owner-occupier variable rate, on offer from an estimated 40+ lenders.
• 5.24 per cent is likely to be the lowest variable rate on Canstar.com.au.

What kind of buffer do Australians currently have?

Many borrowers are actually ahead on their repayments, particularly those who did not adjust their mortgage repayments following the three cuts in 2025. Many of these borrowers might not see a rise to their mortgage repayments at all, although this will depend on their bank’s settings.

Borrowers urged to act early if repayments become difficult

Borrowers with a mortgage should understand what their minimum monthly repayment will rise to following this hike, and potentially one or two more.

If there is any risk of falling behind, borrowers should talk to their lender about what options they might have before missing a repayment.

First steps:

• Request a rate reduction.
• If this is not met by the lender, borrowers should explain their financial circumstances and explore support options to help manage repayments.

Options may include:

• Switching to pay interest-only instead of principal and interest temporarily.
• Part-payments for a set period of time.
• Extending the loan term.

These options can provide relief, but they all come with longer-term financial consequences. It’s important to weigh them up carefully and seek independent financial advice.

“The underlying pulse of inflation is too strong,” governor Michelle Bullock said after the decision.

“The cash rate was no longer at the right level to get inflation back to target in a reasonable time.

“High inflation hurts all Australians.

“We can’t let inflation get away from us again.”

Financial markets already predict another hike within the next six months.

RBA governor Michele Bullock is just moments away from taking questions from the media about today’s rate rise.

Treasurer Jim Chalmers has come under fire in Question Time following the Reserve Bank’s decision to lift interest rates for the first time in more than two years.

Within moments of the decision being announced, Mr Chalmers put the blame for the move on the former coalition government and external pressures.

“Mr Speaker, now I want to make it really clear to the house and the people watching from home, Mr Speaker, that the statement released by the independent Reserve Bank explaining the decision that they have taken today does not mention Government spending,” Dr Chalmers said.

“It makes it very clear that the pressure on inflation is coming from private demand.

“Mr Speaker, they left us much higher inflation and left us a much weaker budget.

“This side of the house is focused on the cost-of-living challenge. That side of the house is focused on who sits where from one week to the next. We won’t be distracted by opposition parties, which are divided, decisive and in disarray.”

The answer is simple - hit up your lender for a better deal if it passes on the full whack.

Cracks are appearing in the facade of the big four banks, which combined have a market captial worth of just over $625 billion.

Macquarie Bank is breathing down the neck of two big lenders so competition is hot to keep your business ... and just 10 minutes of your time on the phone could help to wipe out some (if not all) of today’s hike.

Those in the best position to negotiate will have a decent block of equity in their home.

With a red hot housing market, your little slice of the Australian dream could well be worth a hell of a lot more than you think it is - giving you equity you never knew you had, a just the boost you need to ease the pain.

Do your research, find a better deal and demand your lender matches (or betters) it.

Loyalty could be robbing you (and your financial future) blind.

VanEck’s head of investments and capital markets, Russel Chesler, said the RBA board was stuck between a rock and a hard place today.

The result was a rate hike and a blow for millions of homeowners who will now have to find extra to meet their minimum monthly repayments.

“The economy is running hot and the RBA had no real choice but to pull the trigger today,” Mr Chesler said.

“While the move was widely expected ... the RBA is a long way from declaring victory, and one rate rise alone is unlikely to do the job.

“What makes this decision more consequential is that the economy is showing few signs of cooling. Unemployment remains low at 4.1 per cent, household spending is holding up, and property prices continue to climb.

“Yesterday’s ANZ-Indeed Job Ads data showed ads jumping 4.4 per cent month-on-month in January, the strongest increase since early 2022, signalling renewed momentum in the labour market rather than the slowdown the RBA would be hoping for.”

The Reserve Bank’s key message from its rates decision - released just moments ago - doesn’t offer much home for borrowers going forward.

It also said that the rise in consumer prices is not just down to one-off factors such as the end of power rebates.

The board said it “considers that inflation is likely to remain above target for some time”.

RBA govenor Michele Bullock knows full-well that homeowners shoulder the biggest burden when rates rise but has in the past argued that the risk of doing nothing to tame inflation would hurt everyone.

Here’s what the board had to say ..

A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025. 

“While part of the pick-up in inflation is assessed to reflect temporary factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight.”

For an owner-occupier with a $600,000 mortgage and 25 years remaining, it would see their minimum monthly repayments rise by $90, assuming the banks pass it on (who are we kidding?)

Here’s what it means for other-sized mortgages ..

Compare the Market’s economic director David Koch says a rate rise “seems like the medicine we need to take to stop inflation accelerating, or at least that’s the judgement from the RBA”.

“If banks pass it on, as I expect they will, this will have a direct and immediate impact on household budgets, particularly for borrowers with larger mortgages or those who have only been paying the minimum repayments.

“We’re talking pushing monthly repayments up by about $94 for someone with a $600,000 mortgage. That’s about an extra $1128 a year — money many households simply don’t have to spare when they’re also being hit with higher grocery costs, insurance premiums and energy bills.”

As expected, the board was atune to stubborn inflation which it said had “picked up materially in the second half of 2025.

“The board has been closely monitoring the economy and judges that some of the increase in inflation reflects greater capacity pressures.”

“As a result, the board considers that inflation is likely to remain above target for some time.”

“There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy is restrictive.

“On the domestic side, if growth in demand is stronger than expected, and growth in the economy’s supply capacity remains limited, it is likely to add further to capacity pressures.

“Uncertainty in the global economy remains significant but so far there has been little or no depressing effect on the Australian economy; indeed, recent growth and trade in Australia’s major trading partners has surprised on the upside.”

The Reserve Bank board has upped its official cash rate to 3.85 per cent, matching market punters’ expectations that it was necessary to keep a lid on inflation that had crept back outside its comfort zone.