Final hammer? Hawkish RBA stomps inflation with 0.25% May rate hike

RBA Martin Place

After a month of uncertainty, the Reserve Bank of Australia has pumped the brakes once more with a 0.25% hike to the official cash rate, lifting it to a sky-high 3.85% p.a. 

Heated debate anticipated today’s decision, with many analysts predicting a “coin flip” between a hike and no hike. The most dovish argued that declines in retail spending and inflation were enough to justify a pause, while the most hawkish pointed to signs of worldwide economic uncertainty and mortgage stress at home.

However, with inflation still well outside the RBA’s target, the central bank has given the economy another hit to ensure the slowdown sticks. Otherwise, they could risk undoing all the progress the previous hikes have made.

In a post-meeting statement to the press, RBA governor Philip Lowe explained, "The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook."

"While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range."

But with symptoms of contraction already cooling the overheated economy, today’s announcement may have brought us closer to the cash rate peak. Lowe softened his language considerably around how much higher rates will have to go to effectively curb inflation.

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve."


Are interest rate hikes done for the year?

Collage of a man sitting atop a rate hike.

With interest rates now stratospheric, many homeowners will wonder how much further the RBA must go in its war against inflation. Indeed, in a survey conducted earlier this year by Mozo, only 39% of respondents can afford rate rises from this point forward. 

“People are already feeling the cost of living pressures acutely,” explains Mozo banking expert Peter Marshall. “But at the same time, inflation hasn’t come down far enough. Spending hasn’t really slowed as much as the Reserve Bank would like.”

Today’s decision, in the central bank’s eyes, may prove painful but ultimately necessary to avoid the caustic effects of long-term inflation. 

Many of the Big Four Banks, however, reckon 3.85% might be as high as interest rates will go, though there is always potential for a 4.10% terminus in June. Either way, we now sit firmly in territory strong enough to contract the over-inflating market. 

“I think we’re either at – or very close to – the peak of the cash rate,” concludes Marshall.

How far have rates come since 2022?


Which banks have increased rates?

Collage of people adding blocks.

We’ll track which lenders have changed interest rates as word comes in. To see how your lender compares, visit our home loan comparison page.

Home Loan Old rate New rate Effective date Rate change Naughty or Nice
6.39 6.64 5 May 2023 0.25
ANZ Index Variable Rate (Owner Occupier, Principal & Interest)
7.89 8.14 12 May 2023 0.25
5.64 5.89 4 May 2023 0.25
6.49 6.79 8 May 2023 0.25
5.7 5.95 16 May 2023 0.25
7.49 7.74 9 May 2023 0.25
8.12 8.5 12 May 2023 0.25
8.28 8.53 12 May 2023 0.25
7.95 8.2 12 May 2023 0.25
8.05 8.3 12 May 2023 0.25
6.29 6.54 12 May 2023 0.25
7.11 7.36 11 May 2023 0.25
7.99 8.24 16 May 2023 0.25
5.49 5.74 22 May 2023 0.25
8.21 8.46 16 May 2023 0.25
5.79 6.04 9 May 2023 0.25
loans.com.au Smart Home Loan 90 (Owner Occupier, Principal & Interest)
6.29 6.54 5 May 2023 0.25
6.46 6.71 19 May 2023 0.25
8.11 8.36 13 May 2023 0.25
8.02 8.27 12 May 2023 0.25
7.75 8.0 12 May 2023 0.25
8.11 8.36 16 May 2023 0.25
8.36 8.61 16 May 2023 0.25
8.48 8.73 12 May 2023 0.25
6.19 6.44 11 May 2023 0.25
8.08 8.33 16 May 2023 0.25

Read last month's Reserve Bank interest rates update.

Compare home loans - last updated 3 March 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Home Fixed Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.80% p.a.
    fixed 3 years
    5.91% p.a.

    Enjoy the security of a competitive fixed interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply). Mozo Experts Choice award winner.

    Compare
    Details
  • Straight Up

    Obliterate, Owner Occupier, Principal & Interest, <50% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.24% p.a. variable
    6.24% p.a.

    Get a low variable rate depending on your deposit with Athena’s Straight Up Variable Home Loan. AcceleRATES feature helps you to reduce your home loan even faster (T&Cs apply). Zero fees to pay. Free redraw facility. Handy mobile app to manage your home loan.

    Compare
    Details
  • Offset Home Loan

    Package, Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.15% p.a. variable
    6.40% p.a.

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

    Compare
    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.