RBA Interest Rate Update: July 2022

Interest rates increased, again – July 2022 RBA update

Last updated: 05 July 2022

Key points: 

  • Australia’s official interest rate has increased by 50 basis points (0.5%) 
  • Rates are increasing to tackle inflation which remains a global challenge 
  • Expect banks to increase rates on some mortgages, loans and savings accounts 
  • Your credit score is not directly impacted by interest rate rises 

 

Interest rate increase 

The Reserve Bank of Australia (RBA) has increased interest rates by another 0.5%, marking the third month in a row of rate rises. 

 

Prior to May 2022, the RBA had not increased interest rates since 2010 but the hat-trick of rate rises – with the RBA indicating there is more to come – has landed in quick succession with the Cash Rate sitting at 1.35% compared to 0.1% in April 2022. 

 

How much for lettuce?! 

The major factor driving the increase in interest rates is inflation, which is a measure of the increase in the cost of living. Inflation is a global problem with developed countries such as the United States, UK and New Zealand breaking decades-long inflation records this year and lifting interest rates accordingly. 

 

The RBA targets an annual inflation rate of 2-3% in Australia. However, inflation remains above 5% p.a. in Australia with food and petrol amongst the essential items making a dent in our wallets. 

 

Australia’s minimum wage increased by 5.2% this month, which will assist this cohort to meet the cost-of-living pressures although some experts believe this may fuel an inflation “spiral” especially with unemployment already at an historically low 3.9%. 

 

Expect banks to increase rates 

Banks took just a few hours to announce they were passing on last month’s rate hike to borrowers. 

If the interest rate hike is passed on by your bank in full, mortgage holders could expect to pay an extra c. $130 per month on a mortgage of $500,000. If your bank passed on all three of the recent interest rate hikes, that repayment rises to c. $320 per month with even more rate hikes expected soon. 

 

Many Australians who locked in low fixed-rate home loans during the pandemic are facing a steep increase in mortgage repayments when their fixed-rate period ends. If you are considering your options, there are still competitive mortgage rates available which you can see with our latest offers. 

 

Impacts to your credit score 

Rising interest rates may impact your ability to repay debt but it won’t impact your credit score unless you start missing your repayments. If you are looking to refinance or simply want to see how banks view your credit file,
log in to see how your credit score is tracking.