Sunita Somvanshi
If you have a variable home loan, your repayments could move again. Every RBA interest rate decision now matters to anyone with a mortgage. The Reserve Bank lifted the cash rate to 4.85 per cent on 3 November. That is its highest level since late 2008 and the fifth rise this year. Inflation is still above the Reserve Bank’s 2 to 3 per cent target band. The Board has not given a timetable for any future rate move.
The Reserve Bank of Australia (RBA) sets the cash rate, and its changes flow through to variable mortgage rates, although lenders set their own rates. On 3 November, the Board voted six to three to raise the cash rate by a quarter point to 4.85 per cent. The Board said inflation is now expected to stay above 3 per cent for the coming year. The 3.6 per cent figure is trimmed mean inflation for the year to September. The measure strips out the biggest price swings to show the underlying trend. The Australian Bureau of Statistics (ABS) publishes the consumer price index (CPI) figures behind these numbers.
For Australian homeowners on variable mortgages, higher rates keep adding to repayments. On a $600,000 loan over 30 years, one quarter-point rise adds about $97 to $100 a month. That is at starting rates between 6 and 6.75 per cent. The Board does not expect inflation to reach the top of its target range until late 2027. Borrowers should check their budgets now, ask their lender about a better rate, and consider whether consolidating debt makes sense. If the monthly budget has little room, start there.
RBA interest rates: the March debate over what drove inflation
In March, the Reserve Bank lifted the cash rate to 4.10 per cent. Governor Michele Bullock and Treasurer Jim Chalmers gave different explanations for inflation. The Reserve Bank, based at 65 Martin Place in Sydney, sets the cash rate. The government sets spending through the budget. Those two levers can work against each other. Jim Chalmers is the Labor MP for Rankin, a Queensland seat that includes part of Logan City.
Headline inflation was 4.3 per cent in the year to September. Automotive fuel is excluded from the trimmed mean, which the ABS says was a key driver of the gap between the two figures. The Board pointed to higher fuel and other commodity prices affected by the conflict in the Middle East. The Board said inflation in many goods and services remains high. In March, Bullock said demand was outstripping supply. She said a rate rise was “the only instrument we have.” The Board says monetary policy is well placed to respond to developments.
The Board said the interest rate increases this year will help to slow spending in the economy further. In March, Chalmers said Middle East developments were making the challenge harder, rather than easier.
Will interest rates go down in Australia in 2027? The Board’s Statement on Monetary Policy does not see inflation back in the middle of the target range until mid-2028. Trimmed mean inflation was 3.6 per cent in September, above the 2 to 3 per cent target range. The Board will continue to do what it considers necessary to bring inflation sustainably back to target. The outlook depends on the next inflation data, so forecasts can change quickly.
Rates are high, and the next move depends on inflation. Borrowers do not need to wait for a Reserve Bank decision to act. Review your loan, compare lenders and build a buffer for higher repayments. If the numbers are tight, switch or refinance your home loan. You can also talk to a free financial counsellor through the National Debt Helpline on 1800 007 007 before you make big decisions.
