The hikes mean that loan repayments for a $500,000 loan have gone up more than $13,300 a year since the hike began in May 2022 and there could be one more rate cut to come in December, although that is no certainty.
In delivering the hike, RBA Governor Michele Bullock said inflation was still too high and had proved to be more persistent than was expected even a few months ago.
The bank’s expectations were that inflation would only be back in the target range of between 2 and 3 per cent by the end of 2025 and even then at the top of that range.
“While the central forecast is for the consumer price index to continue to decline, progress looks to be slower than earlier expected,” Bullock said.
She said the weight of information the bank had seen “suggests that the risk of inflation remaining higher for longer has increased”.
“While the economy is experiencing a period of below-trend growth, it has been stronger than expected over the first half of the year,” Bullock said.
“Underlying inflation was higher than expected at the time of the August forecasts, including across a broad range of services. Conditions in the labour market have eased but they remain tight. Housing prices are continuing to rise across the country.
“At the same time, high inflation is weighing on people’s real incomes and household consumption growth is weak, as is dwelling investment. Given that the economy is forecast to grow below trend, employment is expected to grow slower than the labour force and the unemployment rate is expected to rise gradually to around 4.25 per cent.
“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.”
Comparison website Mozo said the interest rate hikes have seen mortgage holders with a $500,000 loan scrambling to find $1037 more every month to cover rising repayments.
“If lenders pass on the 0.25 per cent hike by the RBA today in full, this means the average mortgage holder will be paying an extra $1116 a month or $13,395 a year more than they were before the hikes started in May 2022,” Mozo said.
Deloitte Access Economics partner Stephen Smith said the RBA was wrong and that retail turnover was at historically low levels and there was not enough evidence to suggest the recent increase in inflation was here to stay.
“With increases to the cash rate only effective at reducing demand-led inflation, it is hard to see what a November rate hike achieves other than making it harder for Australians to pay their mortgage in the lead-up to Christmas,” Smith said.
Real Estate Institute of Queensland chief operating officer Dean Milton said the rising after 13 rate hikes in the current cycle first home buyers were dropping out of the market and building approvals were collapsing.
“This means that the dream of home ownership may be slipping further out of reach with every cash rate rise, and new housing supply is struggling to get off the ground,” Milton said.
“First home buyer activity was down 16 per cent in the 12 months to April and there appears to be no desire from the Queensland State Government to arrest this trend.”