min read
· Posted on
February 21, 2024

Interest rates March 2023: The RBA be humbling us

Interest rates just rose by X%. What does it mean for your mortgage?

What's the key learning?

  • The Reserve Bank of Australia (RBA) has just raised the official cash rate by 0.25% to 3.60%.

Cash rates up AGAIN? Ummm RBA when does this end?! It’s like a bad dream that you can’t wake up from!

This is the tenth consecutive month that the RBA has raised the cash rate, this time by 0.25% from 3.35% to 3.60%. That’s right, it’s almost been a year of back to back rate rises!

The RBA has been grinding HARD to humble inflation and get it back down - but there’s likely still a long road ahead.

In fact, all four of the big banks are predicting that we won't see the cash rate drop until at least November 2023, but some are predicting it’ll be well into 2024 before the cash rate drops. 

So, what happens when interest rates rise?

When the RBA increases the cash rate, the banks will almost always follow suit and raise the interest rate on your loan. 

Experts say it takes around two or three months for individuals to feel the full impact of a rate rise on their cash flow… so the impact of these successive rises won’t be felt until the new year. 

And your interest rate on your savings account should increase too (but often doesn’t increase to the same extent).

How will the cash rate hike impact my home loan?

Here’s a breakdown of how rate rises could impact your home loan if you’ve got a variable rate:

Source: MoneySmart. Based on owner occupier loans of $500,000, $750,000 and $1,000,000 over 25 years.

Why does it feel like rates are so much higher than usual?

You’re not imagining it, they are! But it probably feels even higher because as recently as this May, interest rates were at a historic low of 0.1%.

Here’s a recap of the rises this year:

  • May four: 0.35%
  • June eight: 0.85%
  • July six: 1.35%
  • August three: 1.85%
  • September six: 2.35%
  • October four: 2.60%
  • November one: 2.85%
  • December six: 3.1%
  • February seven: 3.35%
  • March seven: 3.60%

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