- Australian households will face their 12th interest rate hike as the Reserve Bank of Australia raises mortgage bills again in June. The move comes as RBA Governor Philip Lowe cites concerns over stubborn inflation and increases the cash rate target from 3.85% to 4.1%. According to RateCity’s data, this will result in a monthly increase of $76 for a typical $500,000, 25-year housing loan, leading to a total expenditure of over $1,100 since the rise began in May 2022.
The Reserve Bank of Australia is particularly concerned about inflation in the service sector – essential items such as energy and rent – and warns that if wage increases in 2023 are not matched by productivity growth, it may lead to inflation.
“Today’s rate hike is because inflation in our economy is more persistent than anyone would like, especially in areas that the budget has been carefully adjusted to address, whether it’s rent, energy, or out-of-pocket health costs,” Dr. Chalmers said.
He acknowledged that many Australians would find the decision difficult to understand and cope with but noted that the Reserve Bank would be able to explain its decision.
“The Reserve Bank’s job is to contain inflation without damaging the economy, and they will have plenty of time and opportunity to explain and defend the decision they made today,” he said.
Dr Lowe, who has repeatedly acknowledged the financial toll high interest rates take on households, said on Tuesday that more rates may be needed by mid-2025 to keep inflation in check.
But they are not inevitable, and key calls in July and August will be driven by incoming data.
“The Board will continue to closely monitor developments in the global economy, trends in household spending and the outlook for inflation and the labor market,” Dr Lowe said.
“The Board remains firmly determined to return inflation to target and will take the necessary steps to achieve this.”If you’re looking to refinance your home or need assistance from A Mortgage Broker, Speed Lending in North Sydney, now may be a good time to explore your options in this quieter market.