RBA increases interest rates for the first time in more than 11 years

Today the RBA increased the cash rate by 25 basis points from 0.10 per cent to 0.35 per cent, marking the first rate rise since November 2010.

The average owner-occupier with a $600,000 debt and 25 years remaining on their mortgage will see repayments rise by around $74.

In making his historic decision, RBA Governor Dr Philip Lowe said he was aware of the central bank’s role to play in controlling inflation.

Economist Paul Ryan from PropTrack said that today’s rise was a strong statement by the RBA that it is not influenced by politics.

“By moving today, rather than waiting for further data in June, the RBA is signalling that it will intervene to curb stronger than expected inflationary pressures, despite the ongoing federal election campaign,” Mr Ryan said.

“While the RBA seeks to remain independent from politics, failing to adjust policy may have been viewed as a greater political intervention.”

The RBA has increased interest rates for the first time in more than a decade. (Graphic: Tara Blancato)

The last time the RBA increased interest rates during a federal election campaign was in 2007, when Opposition leader Kevin Rudd was contesting incumbent Prime Minister John Howard.

Mr Howard’s Coalition government lost the election by a landslide just over two weeks later.

Mr Ryan said today’s hike was the tip of the iceberg for borrowers, who are being warned to factor in a number of rate rises this year.

“While this increase in rates was small, it signals the start of a series of interest rate rises before the end of 2022. This will weigh on housing price growth, which has clearly slowed in anticipation of these higher borrowing costs,” he said.

“The outlook for housing prices later in the year is one of a balance between higher mortgage rates and the higher income growth the RBA is looking to see before raising rates.”

Sarah Megginson, senior editor of money at Finder, said some borrowers may find themselves caught short when having to deal with increases on their repayments.

“This rate rise, along with a property market that is beginning to cool, means some recent buyers may be caught out now – or when their fixed rate ends,” Ms Megginson said.

“If your rate has jumped or looks like it is going to, it might be time to go home loan shopping and find a better interest rate.”

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