Australian mortgage holders could face hundreds of dollars in additional monthly repayments if the Reserve Bank raises interest rates for a fourth time this year, with the cash rate expected to reach a 15-year high.
A further 25-basis-point increase would add about $91 a month to repayments on a typical $600,000 home loan, according to Sally Tindall, data insights director at Canstar.
“The true pain is in the cumulative impact,” Ms Tindall said.
She said four increases over the year would leave the borrower paying an extra $364 a month compared with the start of 2026.
Interest rate rise would lift mortgage costs
The Reserve Bank board is widely expected to announce the increase after its two-day meeting concludes on Tuesday. If lenders pass on the full rise, as they usually do, the average owner-occupier variable mortgage rate would reach 6.49 per cent.
The cash rate would stand at 4.6 per cent, its highest level for a generation of borrowers and the same level last experienced in October 2011.
However, home loan debt has increased sharply since then as property prices have risen. Total mortgage debt has grown from $1.05 trillion to $2.51 trillion, Ms Tindall said.
Expectations of a further rate rise have strengthened after hawkish comments from senior Reserve Bank figures in recent weeks. The board appears increasingly prepared to accept higher costs for the economy and rising unemployment in its effort to bring inflation under control.
Price pressures have been linked in part to the conflict in the Middle East pushing up commodity prices and to the artificial intelligence boom increasing the cost of technology components.
Reserve Bank governor Michele Bullock said unemployment needed to be between 4.5 and 5 per cent to help return inflation to target. The comments prompted criticism from unions and social service organisations.
“Raising interest rates is creating unemployment by design, putting thousands of people out of work to slow the economy,” Australian Council of Social Service chief executive Cassandra Goldie said.
She said an additional 200,000 people had been out of paid work since interest rates began rising, and warned that increasing unemployment towards 5 per cent would cause “a human disaster”.
Treasurer Jim Chalmers rejected the suggestion that unemployment needed to be higher to reduce inflation, saying it was possible to have unemployment below 5 per cent while inflation declined.
“We have an inflation challenge in our economy not because unemployment is too low but because the price of petrol is too high and we’ve got other inflationary pressures in our economy,” he told reporters on Monday.
“I’m reluctant to blame the workers of this country for our inflation challenge.”
