Another huge blow for Australians with a mortgage as interest rates are increased for the fifth time this year

Australian homeowners have been hit with another mortgage blow after the Reserve Bank lifted interest rates by a quarter of a percentage point, pushing borrowing costs to a fresh high as it battles stubborn inflation. 

A 0.25 percentage-point increase takes the cash rate from 4.60 per cent to 4.85 per cent, its highest level since the global financial crisis in 2008. 

The decision means a borrower with a typical mortgage will face another increase in monthly repayments, piling fresh pressure on already stretched household budgets.

Canstar data insights director Sally Tindall said Australia may be revisiting 2008-era interest rates, but today’s borrowers have far bigger mortgages to contend with so the reality is much harder.

She said the average new owner-occupier loan has nearly tripled, from $254,000 in November 2008 to $731,000 today, up 188 per cent, while the median property price has risen by 129 per cent, with it now sitting at $884,855.

‘For someone with a $600,000 mortgage, another rate hike will mean finding an extra $92 a month to clear their new minimum repayments. However, across what is now five hikes for the year, the total increase would be a jaw-dropping $456,’ she said. 

‘The pressure is really starting to mount and it’s not just on our central bank,’ she said.

‘Borrowers are already under extreme financial pressure after four rate hikes this year. If the RBA ratchets up the cash rate once again, some will hit their financial ceiling.’

RBA governor Michele Bullock (pictured) and her board have lifted the cash rate to 4.85 per cent, its highest level since the global financial crisis in 2008

Canstar data insights director Sally Tindall (pictured) said Australia may be revisiting 2008-era interest rates, but today’s borrowers have far bigger mortgages to contend with

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.

Share

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.

Share

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.’

Share

‘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.’

Share

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.’