Australian homeowners are facing another mortgage shock after the Reserve Bank raised interest rates by 0.25 percentage points, pushing borrowing costs to a new high as policymakers continue their battle against persistent inflation.
The increase lifts the cash rate from 4.60 per cent to 4.85 per cent, its highest point since the 2008 global financial crisis.
For households with home loans, the latest RBA rate hike means higher monthly repayments and additional strain on budgets that are already under pressure.
Canstar data insights director Sally Tindall said Australia was returning to interest-rate levels not seen since 2008, but borrowers today were carrying significantly larger mortgages, making the impact more severe.
The average new owner-occupier mortgage has climbed from $254,000 in November 2008 to $731,000 today — an increase of 188 per cent. Over the same period, the median property price has risen 129 per cent to $884,855, she said.
For a borrower with a $600,000 mortgage, the latest rate rise will add about $92 to monthly minimum repayments. Across the five increases recorded this year, the total monthly rise would reach $456, according to Ms Tindall.
She said the financial pressure was building rapidly for borrowers, as well as creating a difficult challenge for the central bank.
After four rate increases this year, many homeowners are already under intense financial stress. A further RBA cash-rate rise could push some borrowers beyond what their budgets can handle, she warned.
RBA governor Michele Bullock (pictured) and the board have raised the cash rate to 4.85 per cent, its highest level since the 2008 global financial crisis
Canstar data insights director Sally Tindall (pictured) said today’s borrowers were dealing with much larger mortgages than homeowners faced during the last period of comparable interest rates
How much more you will be paying on your mortgage
Canstar estimates that the 0.25 percentage-point increase will add $92 a month to repayments on a $600,000 mortgage with 25 years remaining.
For that borrower, the five rate rises since February will increase monthly repayments by a combined $456.
RBA governor Michele Bullock warns that people will feel like the economy is in recession due to latest rate hike
RBA governor Michele Bullock has cautioned that the latest interest-rate increases could leave Australians feeling as though the economy is in recession.
Bullock said the central bank’s main forecasts did not point to a recession, but did anticipate a significant slowdown in economic growth.
She said weak consumer spending could make households feel as if the country was in recession. People were feeling poorer, incomes were growing slowly and consumption was subdued, reflecting weak productivity growth and the lasting effects of a major supply shock.
Bullock said the RBA did not want to push the economy into recession. While inflation remained the immediate focus, the central bank also had a responsibility to protect the gains made in the labour market.
How to cut your mortgage interest rate despite the RBA rising them today
Research from Canstar.com.au found that borrowers who took out an owner-occupier loan five years ago and have not renegotiated it could now be paying an interest rate of 7.34 per cent after the latest increase.
A borrower with $600,000 left on a mortgage with 25 years remaining could potentially save more than $9,000 over two years by switching to a competitive 6.49 per cent rate, even after factoring in estimated switching costs of $1,150.
How much you could save by switching banks:
What the RBA said about the rate rise
The Reserve Bank attributed the rise in inflation to higher fuel prices linked to the conflict in the Middle East, domestic economic pressures and the rapid expansion of artificial intelligence.
It said businesses were facing higher costs and many were ‘either increasing the prices of their goods and services in response or looking to do so’.
The rush to invest in AI was also pushing up technology prices.
‘AI-related investment is driving rapid growth in prices for technology-related goods,’ the bank said.
Inflation is now expected to stay above 3 per cent until late 2027 – about nine months longer than previously forecast.
The board warned there was ‘an increasing risk that higher inflation expectations will become embedded’, meaning people and businesses could start treating bigger price rises as normal.
The rate rise came despite signs that earlier increases were already taking a toll.
‘The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen,’ the bank said.
It expects higher borrowing costs and falling house prices to put more pressure on household spending and homebuilding. Unemployment is also expected to rise more than previously forecast.
Even so, the board said another increase was needed to help bring inflation down.
Six members voted to raise rates, while three wanted to leave them at 4.60 per cent.
Iran war a ‘convenient scapegoat’ for Australia’s inflation problem
Global X ETFs senior investment strategist Marc Jocum says the Iran war has become a ‘convenient scapegoat’ for Australia’s inflation woes, warning that the problem is mostly homegrown.
‘It is certainly adding fuel to the fire, but that fire was burning well before the latest geopolitical shock. Only around a third of Australia’s inflation basket is classified as tradable covering goods exposed to international trade and competition, such as fuel,’ Jocum said.
‘The overwhelming share of the basket is non-tradable, highlighting that the vast majority of Australia’s inflation problem is homegrown. It was encouraging to see the RBA explicitly acknowledge this in its latest statement, noting that domestic capacity pressures are tighter than previously assessed.’
Commonwealth Bank warns of largest housing market downturn on record
Commonwealth Bank has warned Australia is heading for its biggest property downturn on record, with home prices forecast to fall 14 per cent from their peak before stabilising late next year.
Change of language from the Reserve Bank
The Reserve Banks vote was 6-3 in favour of the hike, suggesting there is a split in parts of the bank about the direction of interest rates.
The bank’s latest forecasts show trimmed mean inflation, its preferred measure of price pressures will not reach the midpoint of its 2 to 3 per cent target range until June 2028. Headline inflation is expected to peak at 4.5 per cent by Christmas before easing.
Borrowers have been offered a glimmer of hope after the RBA dropped a warning about further rate rises from today’s statement, having included it in recent announcements of rate hikes.
Aussie banks already passing rate rise onto customers
Macquarie was first out of the blocks after the Reserve Bank’s latest rate hike, announcing a mortgage rate increase within a minute.
The bank will raise variable home loan rates by 0.25 percentage points from November 19, matching the RBA’s fifth hike this year, which took the cash rate to 4.85 per cent.
‘With household budgets already feeling the strain, today’s decision by the RBA will be challenging for many Australians,’ head of personal banking at Macquarie Bank Ben Perham said.
‘If you are facing financial hardship or are worried about meeting your home loan repayments, please reach out to our specialist team to understand what financial assistance options may be available.’
‘Won’t fix inflation’: Brutal verdict on the RBA’s rate hike
New analysis by The Australia Institute reveals that while mortgage holders are being hammered by the RBA – with a fifth interest rate rise announced today – the big four banks are making record profits from customers’ pain.
The analysis shows that banks now make a staggering $266,000 profit from the average owner-occupier 30-year home loan of $731,000 – up $40,000 since interest rates start rising earlier this year.
‘The banks are doing nothing to ease the pain of customers. Rather than helping, they’re making it worse, scraping huge profits from people who are only trying to put a roof over their families’ heads,’ said Greg Jericho, Chief Economist at The Australia Institute.
‘While borrowers are struggling to make repayments, going backwards or, worse, losing their homes … the big four banks are cashing in on their misery.’
The analysis reveals that the big four banks now make an average of $12,200 profit in the very first year from the average new owner-occupier mortgage.
‘That’s not money to run a branch, operate an online banking system or even pay multi-million dollar salaries to executives, this is pure profit, on top of all that. It’s obscene.
‘Right now, an average Australian family with an average loan from a big four bank is contributing $234 a week to their bank’s profit – more than a thousand dollars a month going straight to a company which consistently records multi-billion dollar profits while customers experience unprecedented pain.
‘The RBA’s decision to lift interest rates against today punishes people who are already being punished by their bank.
‘Ordinary Australians – particularly those under mortgage stress – are not causing inflation by spending too much. Inflation is being driven by the cost of fuel, caused by Donald Trump’s war in the Middle East, and corporate profits.
‘This brutal decision by the RBA won’t fix inflation. But it will see many decent Australian families forced from their homes.’
Ms Tindall said she was concerned some borrowers may have no more buffer to fall back on.
‘The question now is how much more room households have in their finances. Some borrowers will be able to absorb another increase within their current budget, but others may be forced to raid their savings.’
Former RBA economist Luke Hartigan said the RBA’s previous approach of making smaller, more cautious moves has not done enough to bring inflation under control.
He said the RBA may have little choice but to keep tightening despite the economic risks.
‘This could cause a recession and a dramatic increase in the unemployment rate and further falls in housing prices in early 2027,’ he said.
‘While inflation remains outside the target band it risks inflation expectations becoming unanchored which would be very costly to correct.
‘Interest rates are a blunt instrument for managing inflation. Governments, both state and federal, can have a more targeted role in helping to manage inflation by reducing demand pressures in the short-term via increased taxation and reduced spending while also seeking to boost the productive capacity of the economy over the long-term.’
AMP chief economist Shane Oliver expects national house prices to fall about 15 per cent from peak to trough, warning the downturn is now tracking at its fastest pace since 1980.
AMP chief economist Shane Oliver (pictured) said Sydney, Brisbane, Adelaide and potentially Perth were likely to experience the steepest declines
‘National average prices are down 6.7 per cent and capital city prices down 8.1 per cent from their early-year peaks,’ he said.
‘The rapid decline, combined with more rate hikes than expected, rising unemployment and the structural changes associated with investor tax increases, suggests the top-to-bottom fall is now likely to be around 15 per cent.’
Oliver said Sydney, Brisbane, Adelaide and potentially Perth were likely to experience the steepest declines, while Melbourne and Hobart should prove more resilient.
He expects prices to bottom out in the September quarter next year before beginning a modest recovery in 2027-28, when the Reserve Bank is expected to start cutting interest rates.
‘While we think the RBA, after another rate hike this week, will have done enough to slow demand in the economy and cool inflation, with 4.85 per cent likely to mark the peak in the cash rate, the risk of further hikes remains high,’ he said.
‘In any case, RBA commentary is likely to remain hawkish for some time and we don’t expect rate cuts until the December quarter next year. Absent a crisis, meaningful rate relief is still a long way off.’
Angus Moore, a senior economist with realestate.com.au, said the rate rise will lengthen the downturn already underway in the housing market.
‘Home prices nationally have declined for seven straight months,’ he said.
Further increases in mortgage rates will reduce borrowing capacities again for prospective buyers, adding to the downward pressure on home prices
‘Further increases in mortgage rates will reduce borrowing capacities again for prospective buyers, adding to the downward pressure on home prices.
‘However, the downturn, while brisk, remains an orderly adjustment driven by rising rates and affordability pressures, rather than a distressed housing correction.
‘Labour market conditions remain resilient by historical standards, mortgage arrears rates remain low, few borrowers are in negative equity, and many households retain substantial repayment buffers.’
