In its recent November board meeting, The Reserve Bank of Australia increased the official cash rate for the first time in 5 months to 4.35%. Raised by 25 basis points, this marks its highest level in 12 years, causing more potential hardship for borrowers ahead of the Christmas holiday season.
The Board had kept interest rates unchanged since June after raising them by 4 percentage points since May of the previous year. The 0.25% rise is set to increase monthly payments for a typical $600,000 loan by around $100. Following today's rate increase, approximately one in seven borrowers will find themselves spending beyond their means.
RBA governor Michele Bullock, in a statement following the meeting, highlighted that inflation has shown more lasting strength compared to previous expectations.
"The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly," she said.
"The board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe."
The RBA's August predictions had anticipated a return of inflation to the bank’s designated 2-3% target range by the conclusion of 2025.
Amid soaring demand and a constrained housing supply, the decision to increase interest rates follows last month’s record-high property prices across the nation. The PropTrack Home Price Index for October revealed a 0.36% boost in Australia’s median home price. Sydney, in particular, achieved a record high, marking an 11-month consecutive rise in prices.
Property prices have now reached their all-time
peaks in four major cities—Sydney, Brisbane, Perth, and Adelaide—as well as in regional areas of Queensland and Western Australia.
Various forecasts indicate home values are expected to continue rising further into 2024, despite the interest rate rise.
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