Rates are rising once again as the RBA today ditched its steady approach of recent months and jacked the official cash rate back up to 3.85%.
Amid concerns that inflation may be starting to overheat again, monthly mortgage repayment costs are likely to increase after today’s 0.25% hike by Australia’s Central Bank.
The RBA noted after its first monetary policy board meeting of the year that inflation in the latter half of 2025 had picked up ‘materially’.
‘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 … and labour market conditions are a little tight.
‘The Board judged that inflation is likely to remain above target for some time and it was appropriate to increase the cash rate target,’ said Australia’s Central Bank today.
The RBA has returned to tightening mode, with today’s move marking the first rate increase in just over two years.
After three cuts in the official rate over 2025 – all very welcome for Melbourne borrowers’ monthly costs – today’s news signals a change in direction.
For now, anyway.
Monthly costs could potentially rise by between $90-$150, depending on the loan type and amount.
This rise did not come entirely out of the blue, though, if you looked at what some lenders have been doing.
Data from rate-tracking site Canstar show 34 lenders increased at least one fixed-rate home loan since the previous RBA policy meeting in December, suggesting parts of the market were already pricing in higher rates.
And last week’s inflation figures merely confirmed this trend with annual CPI inflation rising to 3.8% in December, up from 3.4% in November.
Underlying inflation (which strips out price-volatile items) rose to 3.3% in December from 3.2% the month before.
As a result, inflation remains above the RBA’s preferred 2–3% target range, where it has been since September last year. And the Central Bank is keen to get inflation back into this band.
Attention now shifts to the next monetary policy meeting announcement on 17 March. Back-to-back rate moves are rare, which makes a pause the most likely outcome as the RBA assesses the effect of today’s bad news hike. But we may not be able to wait until St Pat’s day to have a nerve-settling Guiness.
‘The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decision,’ added the RBA board today.
However, should we see a rate drop from the RBA in the future, you can find out more in our recently published article on preparing for a rate cut.
If you would like to review your mortgage rate, contact Mortgage Broker Melbourne. We are one of the most positively reviewed mortgage brokers in Melbourne.
Additionally, we can offer you tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household costs.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!