Mortgage Repayments

Reserve Bank increases rates

Borrowers will pay about $50 a month more on their loans after the Reserve Bank increased its cash rate. It is the 6th increase since October last year.

The increase of 0.25% to the official cash rate adds about $50 a month to a $300,000, 25-year home loan, if the increase is passed on in full and brings the official rate up to 4.5%.

Most economists had been tipping the rate rise, with the market pricing in a 69 per cent chance that the Reserve Bank board would hike its cash rate by 25 basis points.

The Reserve Bank governor Glenn Stevens has advised that rates are now back at “average levels”.

“With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more,” Mr Stevens said in his statement to accompany the rates decision.

“The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels.
“This represents a significant adjustment from the very expansionary settings reached a year ago.”