![\"RBA](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/02\/c0a1b820-009f-11f1-b3ff-b2f627646170.png\")
The RBA rate hike was widely expected by economists and markets, following an uptick in inflation. (Source: AAP) <\/p>\n The RBA rate hike was widely expected by economists and markets, following an uptick in inflation. (Source: AAP) <\/p>\n
Millions of Australian mortgage holders<\/a> have been dealt a blow to their household budget after the Reserve Bank of Australia (RBA) hiked interest rates<\/a> at its February meeting on Tuesday afternoon. The central bank unanimously raised the cash rate by 25 basis points to 3.85 per cent.<\/p>\n It\u2019s the first time the RBA has hiked the cash rate<\/a> since November 2023, after no movement in 2024 and three interest rate cuts in 2025. The hike was largely predicted by pundits and the market and follows a surprise uptick in inflation<\/a> to end the year.<\/p>\n RBA governor Michele Bullock said she understood mortgage holders<\/a> would be disappointed with today’s decision, but things could hurt even more if inflation isn’t brought under control.<\/p>\n RELATED<\/p>\n “Every time they go to the shop, every time they go to buy their groceries, every time they go to get personal services, medical, if inflation is high, that’s going to keep going up,” Bullock said in her post-meeting press conference.<\/p>\n “Ultimately, it is best if we get inflation under control and our instrument is the interest rate and I understand that people with mortgages find that hard, but the alternative is potentially even harder.”<\/p>\n The consumer price index<\/a> rose 3.8 per cent annually in December, up from 3.4 per cent in the year to November. The all-important trimmed mean, a measure of underlying inflation, rose 3.3 per cent annually, up from 3.2 per cent.<\/p>\n Do you have an interest rates story to share? Contact tamika.seeto@yahooinc.com<\/a><\/p>\n While inflation has fallen from its peak in 2022, the RBA board said it had picked up “materially” in the second half of last year.<\/p>\n “While part of the pick-up in inflation is assessed to reflect temporary factors, it is evident that private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight,” the board said.<\/p>\n “The Board judged that inflation is likely to remain above target for some time and it was appropriate to increase the cash rate target.”<\/p>\n The RBA’s updated forecasts expect trimmed mean inflation to peak at 3.7 per cent mid this year and remain above the 2 to 3 per cent target range until early 2027. Inflation is then forecast to drop to a little above the midpoint by mid-2028.<\/p>\n These forecasts include the assumption of another rate hike, as markets are predicting, with the board reiterating it will “do what it considers necessary” to bring down inflation.<\/p>\n Bullock said she was not “ruling anything in or out” when it came to further rate hikes.<\/p>\n “I’m not predicting there’ll be more rate rises, but I’m also not saying that if inflation does remain too high that there might be,” she said.<\/p>\n Finder head of consumer research Graham Cooke said the RBA\u2019s hike sent a clear signal that the inflation genie wasn\u2019t back in the bottle<\/a> just yet.<\/p>\n \u201cOur research showed mortgage stress on average had started to subside \u2013 expect it to rise with a vengeance as monthly payments jump,\u201d he said.<\/p>\n \u201cIf inflation persists, expect more of last year\u2019s mortgage stress relief to be wiped away.\u201d<\/p>\n Banks are expected to pass on the full 25 basis point increase to borrowers with variable home loans<\/a> in the days ahead.<\/p>\n For the average $693,802 loan with a 30-year loan term, the increase would add $109 a month and $1,313 a year to repayments.<\/p>\n For larger loans, the hit is obviously higher. A $750,000 loan would increase by $118 a month or $1,420 a year, while a $1 million loan would increase by $159 a month or $1,893 a year.<\/p>\n Get the latest Yahoo Finance news – follow us on Facebook<\/a>, LinkedIn<\/a> and Instagram<\/a>.<\/p>\n