RBA lifts cash rate by 0.25 of a percentage point
Mortgage repayments are on the rise again but not by as much as expected, as Australia’s central bank raised the cash rate by 25 basis points to 2.6 per cent.
The latest hike takes the cash rate to its highest level since 2013.
It came as a shock to economists who had been expecting 50 basis points, which would have been the sixth successive rate hike in as many months and the fifth in a row of the same size, heaping more repayment pain onto mortgage holders.
Financial comparison site RateCity.com.au has analysed what the “supersized” hike would mean to different loan sizes.
• A 0.25 per cent hike would mean an extra $74 to the average repayment on a $500,000 loan.
• It would mean an extra $110 to repayments on a $750,000 loan.
• And an extra $147 to repayments on a $1 million loan.
If you have any concerns relating to mortgage repayments connect to your lender or if you need advise call your local mortgage broker 0403 803 470
What does it mean when the RBA cash rate lifts in 2023
When the Reserve Bank lifts the cash rate, it means that it has increased the target interest rate for overnight loans between banks. This is the rate at which banks borrow or lend money to each other on an overnight basis. The cash rate is the primary tool used by the Reserve Bank to influence economic activity in Australia.
An increase in the cash rate is typically seen as a measure to control inflation. By raising the cash rate, the Reserve Bank aims to reduce the demand for goods and services in the economy, which can help to slow down inflation.
However, an increase in the cash rate can also have other impacts on the economy. It can lead to higher interest rates on loans and mortgages, which can reduce consumer spending and business investment. This can slow down economic growth and potentially lead to job losses.
Overall, an increase in the cash rate signals a tighter monetary policy and can have a range of impacts on the Australian economy and its consumers.
Will the increase in the cash rate impact my savings account interest rate?
Yes, an increase in the cash rate can impact savings account interest rates. Banks use the cash rate as a benchmark for setting the interest rates they offer on deposit accounts such as savings accounts.
When the Reserve Bank cash rate increases, banks may also increase the interest rates they offer on deposit accounts. This is because the banks’ cost of borrowing has increased, and they may need to offer higher interest rates to attract deposits from customers.
However, it is important to note that the impact of a cash rate increase on savings account interest rates can vary depending on a range of factors, such as market competition and the specific policies of individual banks. It is always a good idea to shop around and compare interest rates and terms when looking for the best savings account options.