Pain for millions of Australian homeowners as new bank boss makes first call to hike rates: Here’s how much it’ll cost you – and a chilling hint of more to come

Australian borrowers have survived the 13th rate hike in 18 months, sending the Reserve Bank’s cash rate to a 12-year high of 4.35 percent, while inflation remains higher for longer.

Michele Bullock has presided over her first rate hike as governor and has chillingly hinted at more pain to come – contributing to the heaviest pace of monetary policy tightening since 1989.

“Inflation in Australia has peaked, but is still too high and proving more persistent than expected a few months ago,” she said on Tuesday afternoon.

‘The latest CPI inflation figures indicate that while goods price inflation has continued to decline, the prices of many services continue to rise sharply.’

Australia’s Big Four banks had expected a rate hike in November as the consumer price index (CPI) rose 5.4 percent in the year to September, only a small change from the 6 percent year-on-year in the quarter. June.

In an ominous sign, the RBA now expects inflation to return to the top of its 2 to 3 percent target at the end of 2025, rather than in June 2025.

“Since the August meeting, the board has received updated information on inflation, the labor market, economic activity and the revised set of forecasts,” Ms Bullock said.

“The weight of this information suggests that the risk of inflation remaining high for longer has increased.”

Ms. Bullock chillingly hinted at more rate hikes.

“The administration remains steadfast in its determination to return inflation to target levels and will do whatever is necessary to achieve that outcome,” she said.

The Reserve Bank on Tuesday revised down its forecasts for inflation to fall to 3.5 percent at the end of 2024 and 3 percent at the end of 2025.

“The board determined that a rate increase today was warranted to provide greater assurance that inflation would return to target within a reasonable timeframe,” Bullock said.

The first RBA increase since June will add $99 to an average $600,000 mortgage.

Michele Bullock has presided over her first rate hike as governor and chillingly hinted at more pain to come – contributing to the heaviest pace of monetary policy tightening since 1989

Annual repayments on a typical Australian mortgage this month will be $18,744 higher than at the beginning of May 2022, when Reserve Bank interest rates were still at a record low 0.1 per cent and banks were offering mortgage interest rates that started with a ‘two’. .

In the final quarter of a percentage point increase, the Commonwealth Bank’s variable rate will rise to 6.69 per cent, up from 6.44 per cent.

Tuesday’s increase marked the sixth Melbourne Cup Day increase in the past two decades, with the bad news also occurring in 2003, 2007, 2009, 2010 and 2022.