RBA Interest Rate Update: May 2022
For the first time since 2010, the Reserve Bank of Australia (RBA) has increased interest rates.
Just months after declaring that interest rates will not be increased until 2024, the RBA has announced a 0.25% lift in the official cash rate to 0.35%.
If the interest rate hike is passed on by your bank, mortgage holders could expect to pay an extra c. $60 per month on a mortgage of $500,000.
This is the first official rate increase in over a decade so it is a good time for homeowners to look at refinancing options across fixed and variable rate mortgages – there are still some competitive mortgage rates available. Take a look at the latest offers.
The underlying cause for rate rises is inflation, which is rapidly rising around the globe. Lockdowns across China and the ongoing conflict in Ukraine are impacting supply chains, which is increasing the cost of many goods and services. US inflation climbed to 8.5% for the year to March 2022 – the highest reading in over 40 years – with New Zealand breaking a 30 year record with inflation sitting at 7% across the Tasman. Interest rates have already started rising in those countries.
With the annual inflation rate in Australia sitting at 5.1%, the squeeze is being felt on everyday items so the RBA has moved accordingly. Meanwhile, Australians have come out of COVID-induced lockdowns with a spending splurge, digging into beefed-up savings buffers and leaning on spending incentives. The Federal election on 21 May has also been a driver for further spending promises.
Global events may be beyond your control but you can easily keep a check on what’s happening on your credit file with Credit Savvy. Jump into our new look dashboard now and compare how your score is tracking to other Australians.