RBA raises cash rate by 0.25 per cent
The Reserve Bank of Australia (RBA) has increased the cash rate by 0.25 per cent to 1.75 per cent, the 13th consecutive rise since November 2022. The RBA said the decision was necessary to contain inflation, which has been running above the central bank’s target range of 2 to 3 per cent.
The RBA governor, Philip Lowe, said the economy was recovering from the impact of the COVID-19 pandemic, but still faced some challenges, such as supply chain disruptions, labour shortages and geopolitical tensions. He said the RBA would continue to monitor the situation and adjust the monetary policy settings as needed.
“The Board will not increase the cash rate again until actual inflation is sustainably within the 2 to 3 per cent target range,” Lowe said in a statement. “The Board is prepared to undertake further monetary easing if required to support sustainable growth in the economy and achieve the inflation target over time.”
Big four banks pass on the rate hike to customers
All four of Australia’s big banks – Commonwealth Bank of Australia (CBA), Westpac, National Australia Bank (NAB) and ANZ – have passed on the RBA’s interest rate hike to customers, effective from mid-March. The banks said the rate increase reflected the higher cost of funding and the need to maintain a sustainable margin.
NAB was the first to announce its changes, increasing its standard variable home loan interest rate by 0.25 per cent, from March 17. NAB also increased its Reward Saver bonus interest rate by 0.25 per cent, bringing the total rate to 5.00 per cent.
ANZ and CBA followed suit, raising their variable home loan rates by 0.25 per cent, from March 17 and March 18 respectively. ANZ also increased the rate on its Plus Save account to 4.25 per cent, and introduced a new 12-month advance notice term deposit rate of 4.40 per cent. CBA raised the rate on its NetBank Saver account to 4.10 per cent, and offered a new 12-month term deposit rate of 4.35 per cent.
Westpac was the last of the big four to confirm its decision, hiking its home loan variable rates by 0.25 per cent, from March 21. Westpac also increased the rate on its Life account to 4.15 per cent, and its eSaver account to 4.05 per cent.
Customers feel the pinch of rising rates
The rate hike by the RBA and the big banks will add to the financial pressure on many Australian households, who are already struggling with rising costs of living, such as energy, groceries and housing. According to the latest data from the Australian Bureau of Statistics, the consumer price index (CPI) rose by 3.8 per cent in the year to December 2022, the highest annual inflation rate since 2008.
For a typical mortgage of $500,000, the rate hike of 0.25 per cent will increase the monthly repayments by about $83, or $996 per year. For a savings account of $10,000, the rate hike of 0.25 per cent will increase the annual interest by about $25.
Some customers have expressed their frustration and anger at the rate hike, saying it will make it harder for them to save, invest or pay off their debts. Others have said they will consider switching to other lenders or refinancing their loans to get a better deal.
The big banks have urged their customers to contact them if they are facing financial hardship, and said they have various support measures available, such as payment deferrals, loan restructuring and fee waivers.