RBA’s 0.50% hike in July spells more grief for borrowers. Here’s which banks have raised rates

The Reserve Bank of Australia

The Reserve Bank of Australia has delivered another cash rate hike — this time lifting rates by 50 basis points — as it ramps up its efforts to control surging prices. 

It’s the second half a percentage point increase in two months, suggesting the Board is eager to get ahead of the curve by front-loading this year’s tightening cycle.

In his post-meeting statement, RBA governor Philip Lowe reiterated that while inflation in Australia is high, it hasn’t reached levels seen in many other countries and is expected to decline to 2-3% in 2023. 

He also made clear that more rate hikes are to be expected in the coming months.

​​"Today's increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic,” Lowe said.

“The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.”

How high will the cash rate go?

The central bank began normalising monetary policy in May in a bid to hold back an inflationary tide. Today’s decision brings the cash rate to 1.35% — closer to what economists consider ‘neutral’ territory. 

It is expected to continue down the tightening path for the foreseeable future, with Westpac economists pencilling in another 50 basis point hike next month, followed by a series of smaller hikes which would see the cash rate peak at 2.6% by February next year.

Such an aggressive turn on monetary policy is already causing grief for the approximately 60% of borrowers currently on a floating rate. But Mozo’s banking expert Peter Marshall said there are steps Australians can take to minimise the impact.

“If you’ve got an offset account, put in every little bit of money that you’ve got. It’s absolutely the best way to save on interest. If you don’t have that kind of option available to you, think about refinancing,” he said.

RELATED: Half of Aussie home loan customers fear interest rates over 4%

But not all borrowers will have an easy time refinancing, with the current slowdown in the property market posing a problem for recent buyers in particular.

“Some people are going to find it difficult to refinance because falling home values and rising interest rates are crunching the amount they’re eligible to borrow. Someone who bought a year ago may find their borrowing power has reduced already,” he said.

Indeed, data from CoreLogic shows dwelling prices fell by 2.8% in Sydney and 1.8% in Melbourne over the last quarter, as rate hikes and dwindling finances leave buyers too skittish to enter the property market.

Fixed rates now “out of the market”

Meanwhile, fixed rates have almost entirely lost their sheen. Last week, CommBank increased rates on all fixed terms by a staggering 140 basis points, while NAB raised rates by between 80 and 110 basis points.

Since January, the average 2-year rate among lenders we track has jumped up 231 basis points to 4.87% p.a.

“Fixed rates are basically out of the market now. The big banks are certainly not trying to attract customers with their fixed rates, so they’re looking at making variable loans look great by comparison,” Marshall said. 

We’re even seeing some lenders pushing rates above 7% p.a. However, this is likely due to an overreliance on funding from the US, where interest rates began rising much earlier and at a faster rate than in Australia.

We’ll be keeping track of how banks respond to the RBA’s decision as word comes in. For more information, visit our RBA rate tracker page or our home loan comparison page.

How have banks responded to the RBA’s July rate hike?

Home Loan Old rate New rate Effective date Rate change Naughty or Nice
3.54 4.04 15 Jul 2022 0.5
5.14 5.64 15 Jul 2022 0.5
2.74 3.39 14 Jul 2022 0.65
3.74 4.24 15 Jul 2022 0.5
3.75 4.25 18 Jul 2022 0.5
4.74 5.24 8 Jul 2022 0.5
5.5 6.0 15 Jul 2022 0.5
5.53 6.03 15 Jul 2022 0.5
5.2 5.7 21 Jul 2022 0.5
5.85 6.35 15 Jul 2022 0.5
5.3 5.8 15 Jul 2022 0.5
3.99 4.49 14 Jul 2022 0.5
4.41 4.91 13 Jul 2022 0.5
5.24 5.74 20 Jul 2022 0.5
4.01 4.51 25 Jul 2022 0.5
5.46 5.96 15 Jul 2022 0.5
3.04 3.54 12 Jul 2022 0.5
3.54 4.04 8 Jul 2022 0.5
5.36 5.86 9 Jul 2022 0.5
3.44 3.94 14 Jul 2022 0.5
5.27 5.77 15 Jul 2022 0.5
5.31 5.81 15 Jul 2022 0.5
5.36 5.86 20 Jul 2022 0.5
5.31 5.81 20 Jul 2022 0.5
5.73 6.23 15 Jul 2022 0.5
3.49 3.99 19 Jul 2022 0.5
5.23 5.73 20 Jul 2022 0.5

Read last month's Reserve Bank interest rates update.

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