Reserve Bank Raises Interest Rates for First Time Since 2023
Cash rate lifted to 3.85 per cent, adding approximately $100 to average monthly mortgage repayments
The decision reverses expectations that had built through late 2025 that the RBA would begin cutting rates in early 2026. Instead, the central bank has signaled ongoing concerns about persistent inflation pressures in the economy.
For the average Australian mortgage holder, the rate rise translates to approximately $100 extra per month in repayments. A borrower with a $600,000 loan will see their monthly payments increase by around $100, while those with larger mortgages in Sydney and Melbourne face proportionally bigger hits to household budgets.
The decision comes amid rising cost-of-living pressures and will feed into the federal election campaign, with the Opposition likely to seize on the news as evidence of economic mismanagement. Treasurer Jim Chalmers faced immediate questions in Parliament following the announcement.
Analysis
Why This Matters
This rate hike affects millions of Australian households directly through increased mortgage costs. With household debt levels near record highs, even small rate increases have outsized impacts on disposable income and consumer spending.
Background
The RBA held rates steady through much of 2024-2025 after an aggressive tightening cycle that brought the cash rate from 0.1% to 4.35%. Markets had anticipated rate cuts would begin in early 2026 as inflation moderated.
Key Perspectives
Borrowers will feel immediate pain through higher repayments. Savers may benefit from slightly improved deposit rates. The housing market could face renewed pressure as borrowing capacity shrinks.
What to Watch
Future RBA meetings will be closely scrutinized for signals on whether this is a one-off adjustment or the start of further tightening. Inflation data and employment figures will drive the central bank's next moves.
Sources
- Reserve Bank lifts interest rates for first time since 2023
- Reserve Bank raises interest rates
- Mortgage calculator: how much extra will your repayments cost?
- Use our rate hike calculator to see how rising interest rates might affect you
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- Interest rates: RBA concedes hike is not the news mortgage holders want to hear
- RBA rate hike justification hard to swallow for Australians struggling with cost-of-living
- Interest rate increase expected to cause wave of home loan refinancing
- The government has options to fight inflation, but most are unpopular
- Sorry for our children: Rate hike highlights plight of borrowers vs boomers