The Reserve Bank of Australia’s (RBA) 25-basis-point rate hike on Tuesday came as little surprise to markets. Although for mortgage holders and investors it was far from welcome news, with the nation's central bank pushing the official cash rate (OCR) up to 4.10%.
In a 5-4 majority decision, the bank cited inflationary pressures as the ongoing reason.
"Higher petrol prices will add to inflation. But they're not the reason for today's decision," RBA Governor Michele Bullock said during Tuesday afternoon's press conference. "Inflation was already too high, reflecting the fact that demand is outstripping supply.
"If we do not act, these price pressures will spread, and the eventual adjustment would be harder," the governor continued. "This all suggests that the risks to inflation have tilted to the upside."
Bullock added that if the conflict in the Middle East persists, higher fuel costs could push inflation even higher.
"High inflation hurts all Australians," she said.
Here's what market players are saying.
Chief executive officer of Mortgage Choice
"For borrowers, today’s decision represents an increase of $113 to the monthly home loan repayment on a $700,000 home loan with a 6% interest rate. The RBA has not ruled out further rate rises this year. We are already seeing Australians moving to protect themselves from more rate increases, with a growing proportion of borrowers opting for the certainty of a fixed rate."
Senior economist at REA Group
"“For housing markets, today’s decision will temper the improvement in borrowing capacity that followed rate cuts in 2025. Higher mortgage rates will add to affordability constraints for buyers and will slow the pace of price growth from the strong gains recorded through 2025. National home prices have risen solidly over the past year. However, affordability remains stretched, and further tightening in monetary policy will limit the pace of further price increases through 2026.’’
Interim chief executive officer at the Finance Brokers Association of Australia (FBAA)
“While economic triggers may exist for the RBA to raise the cash rate this week, these are not usual times. Australians are yet to experience the cost of living increases that are predicted to hit soon due to the Middle East conflict. We expect that not only will fuel costs increase, but this will flow through to other supply chain increases and potentially add hundreds of dollars every month to the average household budget. Many mortgage holders may struggle to meet the increased payments. This is particularly the case for first-time homebuyers."
"The Reserve Bank of Australia’s decision to lift the official cash rate by 25 basis points to 4.10% will place further pressure on household budgets. The reality is that higher borrowing costs are now becoming a feature of the economic environment. Borrowers have already become more cautious in a new cycle of higher interest rates and cost-of-living pressures."
Head of Australian Economics at ANZ
"Our views on the RBA are unchanged following today’s rate increase. We expect an additional 25 [basis point] increase in May, which would take the cash rate to 4.35%. That level of interest rates, combined with the negative impact on household finances and demand from the energy price shock, should mark the end of this tightening cycle."
Chief economist at Westpac Group
"Rate hikes will remain on the table and our base case remains for a May rate hike."
Head of Australian Economics at Commonwealth Bank of Australia (CBA)
"Our call of a rate hike in May is another line-ball decision. The likelihood of a third consecutive rate hike will depend on the status of the war in the Middle East and the response of the household sector to two rate hikes and rising prices."
Executive director at aggregator group Connective
"Today’s increase isn’t surprising given inflation remains above target, and demand across housing and credit is still firm. It reflects the RBA’s focus on bringing inflation back to the target range in a steady way. With inflation proving sticky and geopolitical tensions already pushing up costs such as fuel, borrowers should be prepared for the possibility of further tightening if conditions don’t ease."
Data insights director at Canstar
"For someone with a $600,000 mortgage and 25 years remaining, this [rate hike] would translate into a $91 increase in their minimum monthly repayments. Combined with the February hike, that’s a total of $181 more every month, with the potential of more hikes to come. This won’t be just a double whammy for these households, but rather a barrage of higher expenses with rising petrol prices, higher grocery bills and increases to costs like health insurance premiums all putting pressure on everyday budgets."
Business investment lead at accounting firm CPA Australia
"Households are pulling back, businesses are losing confidence and yet costs keep rising. This rate increase adds fresh pressure just as many were hoping for some relief. Many small businesses will be forced to pass on higher costs, while others will delay investment, reduce services or scale back employment.”
