Reserve Bank raises interest rates to 0.35%
Reserve Bank hikes rates for first time since November 2010
The Reserve Bank of Australia (RBA) has raised the official cash rate by 25 basis points to 0.35 per cent, ending a period of record-low interest rates.
The move, which was widely expected by economists, is the first interest rate increase by the RBA since November 2010.
Why has the RBA raised interest rates?
The RBA has been under pressure to raise interest rates as inflation has risen above its target band of 2-3 per cent.
The annual inflation rate rose to 3.5 per cent in the December quarter of 2021, the highest level since 2011.
What impact will the rate rise have?
The rate rise is likely to have a number of impacts on the economy, including:
- Increased borrowing costs for businesses and households
- Slower growth in the housing market
- Reduced consumer spending
The RBA has said that it is prepared to raise interest rates further if necessary to bring inflation back to its target band.
What does this mean for mortgage holders?
The rate rise will increase mortgage repayments for variable rate loans.
The average monthly repayment on a $500,000 loan will increase by around $70.
What should mortgage holders do?
Mortgage holders should consider the following steps:
- Check your budget and make sure you can afford the increased repayments
- Consider fixing your interest rate to lock in a lower rate
- Make extra repayments on your loan to reduce the overall cost
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