Perth, Sept 29: The Reserve Bank of Australia has raised the cash rate by 25 basis points to 4.60 per cent. It is the bank’s fourth increase this year and takes the rate to its highest level in 15 years.
In its statement, the Monetary Policy Board said inflation remained elevated and some of the upside risks it flagged in August were now materialising.
It said the Middle East conflict had broadened, global energy prices were much higher than assumed in its August forecasts, and AI-related demand was driving rapid growth in global prices for technology goods.
“The Board remains focused on ensuring that high inflation does not become embedded,” the statement said. The decision was unanimous.
The Board left the door open to further increases.
“The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed,” it said.
The move was widely expected. In Finder’s RBA Cash Rate Survey, 90 per cent of panellists (37 of 41) correctly predicted the hike, and 48 per cent expect at least one more increase before the end of 2026, with most tipping November.
According to Finder, the rise will add $113 a month, or $1,359 a year, to repayments on the average owner-occupier loan of $730,719. Borrowers with a $500,000 mortgage will pay $78 more a month ($930 a year), and those with a $1 million loan will pay $155 more a month ($1,860 a year).
“Mortgage holders have now had a full percentage point (100 basis points) added to their rate in less than a year. For some families, this will be the difference between just getting by, and going backwards,” said Richard Whitten, home loans expert at Finder.
“If you spot a better deal elsewhere, ask your lender what they can do. If they won’t budge, switch to a more competitive loan. A lower rate could wipe out the cost of today’s hike,” Whitten said.
Nick Chong, founder and director of mortgage advisory firm Rateseeker, said recent buyers would feel it most. “First home buyers and anyone who bought in the last 12 to 18 months at the absolute limit of their borrowing capacity will bear the brunt of this, simply because they have the least financial cushion,” he said.
“Rather than outright panic, we’re expecting a genuine surge in refinancing enquiries as people look to shore up their finances.”
Chong also expects the property market to cool.
“I’d expect softer auction clearance rates and a lull in new loan applications through October as buyers take a breather to reassess,” he said.
The hike lands as home ownership slips further out of reach for younger Australians. Finder’s Consumer Sentiment Tracker found 36 per cent of 18 to 39-year-olds did not expect ever to own their own home in the first half of 2026, up from 13 per cent in 2019.
Savers stand to gain, but only if their banks pass on the increase. Finder found 35 per cent of Australians, or 7.6 million people, don’t know what rate their savings account pays, and that Australians could be missing out on up to $6.3 billion in interest a year.
“There are accounts paying well over 5% right now. If you’re earning less than that, you’re leaving money on the table,” Whitten said.
Adam Bowe, managing director and head of Australia portfolio management at PIMCO, expects the Board to tread carefully from here.
“While the Bank has kept the door open to further tightening we expect that the trade off between growth and inflation will become more challenging from here,” he said.
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