Australian mortgage holders are bracing for higher repayments after the central bank lifted the cash rate target by 25 basis points to 3.85% on Tuesday, its first increase in more than two years.
The Board said inflation picked up in the second half of 2025 and is likely to sit above the 2 to 3% target range for longer than hoped with private demand and capacity pressures stronger than expected.
The move is expected to flow quickly to variable rate borrowers with Commonwealth Bank of Australia, ANZ and National Australia Bank set to lift variable home loan rates from 13 February while Westpac will apply changes from 17 February.
The most recent increase has raised questions about whether the purchase was worthwhile.
“We never would have bought if we had known how much our repayments would end up,” a mid-twenties couple told reporters. Industry insiders caution that the impact may be immediate.
According to Anja Pannek, chief executive of the Mortgage & Finance Association of Australia, the majority of mortgage holders are on variable rates, and a quarter point increase can result in an additional $109 per month for a $694,000 mortgage.
Welfare groups and counsellors say the timing is tough with household budgets already stretched by higher everyday costs.
Financial Counselling Australia has warned that even a single rate rise can tip vulnerable borrowers into trouble while Roy Morgan analysis cited by the National Debt Helpline suggests a 0.25 percentage point lift could push about 1.3 million households into mortgage stress.
Governor Michele Bullock acknowledged the pressure on borrowers but defended the decision, saying getting inflation under control was the right thing for the economy and warning the alternative could be worse.
The Board said it would stay focused on incoming data as it weighs what comes next.
