Major blow for millions of Aussies with a mortgage as RBA leaves rates on hold – here’s why there could be even more pain on the way

The Reserve Bank left interest rates unchanged but hinted that more pain is possible for struggling home borrowers hoping for a speedy rate cut.

Governor Michele Bullock said it took too long for inflation to moderate.

“Recent information indicates that inflation continues to moderate, but is falling more slowly than expected,” she said on Tuesday afternoon.

Ms Bullock also suggested another rate hike was still possible, despite borrowers already facing the steepest pace of monetary policy tightening since 1989.

“The board expects it will take some time for inflation to remain sustainably within the target range and will remain vigilant against upside risks,” she said.

“The interest rate path that best ensures inflation returns to target within a reasonable time frame remains uncertain and the board is not making any comments on anything in or out.”

Cash rates are already at a twelve-year high of 4.35 percent, and borrowers are paying 68 percent more per month than two years ago – after thirteen interest rate increases in eighteen months.

But the RBA has upgraded its forecasts, predicting inflation will remain above the two to three percent target in 2025.

A new monetary policy statement, also published on Tuesday, forecasts that headline inflation will moderate only to 3.2 percent in June 2025 – down from 3.6 percent in the March quarter of 2024.

Underlying annual inflation measures, which exclude large price movements, were above the 4 percent level in the March quarter.

As a result, the futures market has ruled out the prospect of a rate cut in 2024 and forecast relief will be delayed until the second half of 2025.

According to the RBA’s updated forecasts, average inflation fell to 3.1 per cent in June 2025 – down from 4 per cent in March this year.

A borrower with an average mortgage of €600,000 has seen their monthly mortgage repayments increase by 67.7 percent to €3,868 since May 2022 – an increase of €2,306.

That means annual repayments are now $18,744 higher than two years ago, based on a Commonwealth Bank variable rate that has risen to 6.69 per cent – ​​up from 2.29 per cent for those with a mortgage deposit of 20 per cent.

Australian mortgage holders have been hit by the most aggressive rate hikes since 1989, creating a cost-of-living crisis for the country’s 3.8 million mortgaged households.

But the RBA has updated its forecasts, predicting inflation will remain above the two to three percent target in 2025 (stock image shown)