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

By Evlin DuBose · · 2 min read
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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
AMP Bank Variable Rate Loan (Owner Occupier, Principal & Interest, LVR <90%) (Basic Package)
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
Athena Power Up (Liberate, Owner Occupier, Principal & Interest, 70%-80% LVR)
5.64 5.89 4 May 2023 0.25
Aussie Select Basic Variable (LVR>90%, Owner Occupier, Principal & Interest)
6.49 6.79 8 May 2023 0.25
Bank Australia Basic Home Loan (LVR>90%, Owner Occupier)
5.7 5.95 16 May 2023 0.25
Bank of Queensland Clear Path Variable Rate Home Loan (Owner Occupier, Principal & Interest)
7.49 7.74 9 May 2023 0.25
Bankwest Bankwest Simple Home Loan (LVR 95-98%, Owner Occupier, Principal & Interest)
8.12 8.5 12 May 2023 0.25
Bendigo Bank Variable Rate Residential (Owner Occupier, Principal & Interest)
8.28 8.53 12 May 2023 0.25
Beyond Bank Standard Variable Home Loan (Owner Occupier, LVR<90%)
7.95 8.2 12 May 2023 0.25
Commonwealth Bank Standard Variable Rate (Owner Occupier, Principal & Interest)
8.05 8.3 12 May 2023 0.25
Great Southern Bank Offset Variable (Owner Occupier, Principal & Interest, LVR >90%)
6.29 6.54 12 May 2023 0.25
Greater Bank Great Rate Home Loan (Owner Occupier, Principal & Interest)
7.11 7.36 11 May 2023 0.25
Heritage Bank Standard Variable (Owner Occupier)
7.99 8.24 16 May 2023 0.25
HSBC Standard Variable Rate Home Loan (Owner Occupier, LVR 80-90%) (Home Loan Package)
5.49 5.74 22 May 2023 0.25
IMB Bank Standard Variable Home Loan (Owner Occupier, Principal & Interest)
8.21 8.46 16 May 2023 0.25
ING Mortgage Simplifier (LVR>90%, Owner Occupier, Principal & Interest)
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
Macquarie Offset Home Loan (Owner Occupier, LVR 90-95%, Principal & Interest) (Package)
6.46 6.71 19 May 2023 0.25
ME Flexible Home Loan (Owner Occupier, LVR 80-95%, Principal & Interest)
8.11 8.36 13 May 2023 0.25
NAB Tailored Home Loan (Owner Occupier, Principal & Interest, LVR <95%)
8.02 8.27 12 May 2023 0.25
Newcastle Permanent Real Options Home Loan (Owner Occupier, Principal & Interest)
7.75 8.0 12 May 2023 0.25
RAMS Full Feature (Owner Occupier, Principal & Interest, LVR<95%)
8.11 8.36 16 May 2023 0.25
St. George Standard Variable Home Loan (Owner Occupier, Principal & Interest, LVR 80-95%)
8.36 8.61 16 May 2023 0.25
Suncorp Standard Variable Loan (LVR<95%, Owner Occupier, Principal & Interest)
8.48 8.73 12 May 2023 0.25
ubank Flex Home Loan (Owner Occupier, Principal & Interest, LVR 80-85%)
6.19 6.44 11 May 2023 0.25
Westpac Rocket Repay Home Loan (Principal & Interest, 70-80% LVR)
8.08 8.33 16 May 2023 0.25

Read last month's Reserve Bank interest rates update.

Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can compare more home loans here.
Last updated 23 October 2024 Important disclosures and comparison rate warning*

Home loan comparisons on Mozo

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  • Fixed Rate Home Loan

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  • Variable Home Loan

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  • Fixed Rate

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* 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.

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.