Struggling mortgage holders now face more than $6,000 in extra repayments after the Reserve Bank of Australia delivered yet another interest rate hike.
The central bank agreed to increase the official cash rate by 25 basis points in an attempt to curb inflation at its monetary policy meeting on Tuesday.
The RBA board was split on its decision, with six members voting to raise rates, while three voted to keep them on hold.
The hike is the fifth for the year and takes the cash rate to an 18-year high of 4.85 per cent, with Treasurer Jim Chalmers labelling the decision as “difficult news” for Australians.
“Today’s decision was widely expected but that doesn’t make it any easier for Australian families and businesses to absorb,” he said in a statement.
“Australians are already struggling and this will stretch their budgets even further.
“The full impacts of the previous rate rises earlier this year haven’t been fully felt yet and will slow our economy further when they are.”
In line with the rate call, Australians with the average home loan of $730,719 will now have to pay $538 more per month, or $6460 more per year, in mortgage repayments.
To put this sum into perspective, that could have paid for up to six months of groceries for an average family of four, or a modest holiday within Australia.
Those with a $1 million mortgage will see their repayments rise by $737 per month – an extra $8840 per year – compared to what they were paying at the start of the year.
Commenting ahead of Tuesday’s decision, Domain chief residential economist Dr Nicola Powell said the 25-basis point rise looked increasingly likely.
“Inflation is proving more persistent than expected. Higher fuel prices are contributing, but underlying and domestically driven inflation also remain elevated,” Powell said.
“This isn’t just an energy story. Services and non-tradeable inflation point to ongoing domestic price pressures and capacity constraints within the economy.”
Australia’s annual inflation increased to 4.3 per cent in September, remaining above the RBA’s target band of 2 to 3 per cent despite slowing household spending and uneven economic conditions across sectors.
Powell noted the RBA’s tone has become “more hawkish”, with a clear focus on bringing inflation sustainably back to target and a willingness to tighten policy further if required.
“The bigger uncertainty is what happens beyond November,” she said.
“Higher mortgage repayments also reduce household disposable income, while weaker borrowing capacity puts a brake on buyer demand and adds further downward pressure to prices.”
Commonwealth Bank senior economist Trent Saunders delivered a dire four decade low for house prices after the bank revised price forecasts.
“On our updated forecast, national dwelling values ultimately fall by around 14 per cent peak to trough,” Saunders said.
“That would make the current downturn the largest decline in national dwelling prices in the history of the monthly series, which extends back around 45 years.”
He noted since releasing its September update, the downturn has accelerated further.
“National dwelling prices fell by 1.2 per cent in October, the seventh consecutive monthly decline, and are now 6.7 per cent below their March peak,” he said.
“The combined‑five capitals index is 8.2 per cent below its March 2026 peak. This is the fastest pace of decline in at least 40 years and is already close to the 8.6 per cent peak‑to‑trough fall recorded in the 2017–19 downturn.”
He noted historical revisions have also shown the downturn was “earlier and sharper than initially reported”.
“The revisions mean that the downturn was more firmly established at the time of our September update than the available data indicated, while the market response since then has also been materially weaker than we expected,” Saunders said.
“The scale of the revisions reinforces the need to treat initial monthly home price estimates cautiously around turning points. We now expect a deeper correction.”
LJ Hooker head of research Mathew Tiller said the rate hike will add downward pressure on property prices, but it won’t have the same impact in every market.
“The immediate effect will likely be on buyer demand and sales activity, with some purchasers reducing their budget or putting their plans on hold, while others will look to negotiate harder,” Tiller said.
“Properties that meet buyers’ needs and budget will continue to transact even with the higher mortgage repayments. Areas with limited stock and strong underlying demand may continue to see competition. We are expecting that some vendors could also become more hesitant, particularly if their next purchase requires a larger loan.”
Price Buyers Agents founder Glenn Price had a blunter assessment.
“A hold was never going to fix this market. It only stems from the bleeding. A hike is a bloodbath, and it is about to create a lot more sellers,” he said.
“Take a buyer who could just afford the median 12 months ago, with a 20 per cent deposit and the same income. Borrowing power is down about 9 per cent already, and a hike takes it to about 10 per cent.”
Tiller pointed to the latest Cotality figures which indicate Australia’s housing market is slowing, but this hasn’t led to a surge in sellers.
Total listings are up 17.9 per cent, but new listings are down 12.5 per cent annually.
“More homes on the market doesn’t mean panic selling; it can reflect slower sales, extended marketing campaigns and changing confidence in the economy,” Tiller said.
He added that higher interest rates are putting more pressure on investors’ cash flow.
“Some investors may be juggling finances at the moment, but it doesn’t mean that tenants will be affected automatically,” he said.
“Rent depends on rental availability, demand and what tenants can afford and with vacancies rising and rental growth easing, there will be a limit to how much extra costs can be passed on.”
Powell said the key question for housing forecasts is not simply “where rates peak”, but how long they stay there.
“A peak followed by an extended hold would create a very different housing outlook to further hikes above 5 per cent, or an earlier move towards cuts,” she added.
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