The Reserve Bank of Australia Interest Rate Hike affects Mortgagors



The Reserve Bank of Australia (RBA) has raised the official cash rate by 25 basis points (0.25%) from May 2, marking the 11th increase in the lending tightening cycle. This move brings the cash loan ratio to 3.85%, which happens to be the highest interest rate since April 2012.

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​​​​​​The Reserve Bank of Australia (RBA) has raised the official cash rate by 25 basis points (0.25%) from May 2, marking the 11th increase in the lending tightening cycle. This move brings the cash loan ratio to 3.85%, which happens to be the highest interest rate since April 2012.

In a statement, RBA Governor Philip Lowe said that although inflation in Australia has passed its peak, it still remains too high at 7%, and it will take some time before it returns to the RBA's target range. This move is an attempt to ease inflation and control the economy.

The Reserve Bank of Australia Interest Rate Hike affects Mortgagors

Recently, there has been a noticeable increase in house prices in Australia. According to PropTrack, house prices in Australia increased by 0.14% in April, and Sydney house prices have increased by 1.68% so far this year. This is a significant increase when compared to the lows recorded in December 2022, as national house prices are now up by 0.75%.

Despite the previous downturn in the Sydney property market, it has now made a strong recovery and is leading the way for other property markets in terms of house prices. Meanwhile, Melbourne has overtaken Sydney in terms of annual home price decline.

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There are many factors that contributed to the rise in house prices. Strong migration, tight rental markets, and limited supply have all helped to offset the impact of the previous rate hikes. The head of research for Australia's largest property group LJ Hooker, Mathew Tiller, said that market conditions had been buoyant with the new property listings still priced 10% below the five-year average, creating the basis for competition among buyers.

This rate hike will undoubtedly impact the housing market, and it remains to be seen which effect will be more significant – will this increase in interest rates see a dip in house prices, or will the current trend continue? One thing is for sure, this rate hike is an attempt by RBA to ease inflation, and it is essential to take note of the impact it will have on the Australian economy.

The Reserve Bank of Australia Interest Rate Hike affects Mortgagors

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