Mortgage holders hit again as RBA raises rates

Millions of Australian households are likely to feel the pain of higher mortgage repayments in the coming weeks following another hike to interest rates.

The official cash rate was increased by 25 basis points to 4.35% by the Reserve Bank of Australia's (RBA) Monetary Policy Board this afternoon - the third consecutive rate rise handed down by the Board.

The latest decision means that the three cuts passed on by the Board last year have now been reversed, with the cash rate back to its highest level since November 2011.

Like in March, the verdict wasn't quite unanimous though, with eight Board members voting in favour of the rate rise and one member voting to leave rates steady at 4.10%.

What pushed the RBA Board to lift rates?

As usual, the issue of inflation was at the heart of the decision.

Last week the Australian Bureau of Statistics released its latest Consumer Price Index (CPI) which revealed that the headline inflation rate had ticked up to 4.6% over the 12 months to March.

The rate of trimmed mean inflation - which strips out more volatile price movements like the recent surge in fuel prices - was flat though, coming in at 3.3%.

The crux of the matter though is that both rates remain above the RBA's 2-3% target inflation band - a fact the RBA Board stressed in its post-meeting statement.

"As expected, developments in the Middle East are having an impact on inflation. Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly.

"This inflation impulse is in addition to the high inflation recorded around the start of 2026, reflecting capacity pressures in the economy.

"In light of these considerations, the Board assessed that inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations."

Mortgage holders brace for further pain

After rate rises in both February and March, homeowners with a mortgage will barely have had time to adjust to their new, higher mortgage repayments.

So now that the cash rate has been increased again, how much more will borrowers need to budget for? Assuming that lenders pass on the latest rise, that is.

On the average new loan amount for owner occupiers of $736,000 and a typical variable rate of 6.00%, a 25bp increase would add roughly $120 each month.

The reality for many borrowers is that there's left room left to move in their budgets though.

Research conducted by Finder before today's RBA meeting found that one in 10 mortgage holders (9%) wouldn't be able to afford their mortgage if they were hit with two rate rises.

More concerningly, 3% of the borrowers surveyed said that they would only be able to absorb one more rate rise before falling behind on their loan.

"Speak to your lender as soon as possible if you're struggling - there may be options available to help you stay on top of repayments," says Richard Whitten, money and home loans expert at Finder.

"Refinancing or negotiating a cheaper rate could make a meaningful difference to your monthly costs."

Looking forward, borrowers - and everyone else - won't have too long to wait until the next potential rate change.

That's because the Reserve Bank Monetary Policy Board will convene again for its next meeting in six weeks' time on June 15 and 16.

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