RBA interest rates live updates: Reserve Bank hits homeowners with more pain to curb red-hot inflation

RBA governor Michele Bullock is facing questions, acknowledging the extra pain her board has just inflicted on mortgageholders.

“I understand this is a really difficult time for households who are already facing higher fuel prices and other cost-of-living pressures,” she said.

“But we must get on top of inflation now so that it doesn’t get away from us.

“We’re already seeing it in many firms that are facing cost pressures ... they’re looking to increase prices for their goods and services.

“If left unchecked, higher cost get embeded into price and wage-setting decisions. These second round effects could lead to even higher and persistent inflation and, if so, would require even more tightening of monetary policy.”

If today’s hike sends shivers down your spine, there’s a few thing you can try to limit the financial pain that’s coming.

Canstar suggests:

1. Run the numbers. Work out what your repayments would look like but also if there are two further hikes in June and August, as Westpac is forecasting. While this forecast is an outlier, it’s worth preparing for.

2. Ask for a better rate. Contact your lender and request a rate review. A 0.25 reduction can offset a hike, while 0.50 off your current rate will neutralise two.

3. Consider switching. Haggling will only take your rate so far. Those who want the sharpest rates are likely to have to refinance.

4. Know your support options. If repayments are becoming difficult and you’ve already negotiated with your lender, ask about hardship assistance. Also seek independent financial advice via the ​National Debt Helpline​: 1800 007 007.

Here’s what you’ll now be paying once the banks pass on the increase:

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“Many borrowers are still wedded to the majors, but the sharpest rates sit firmly with the smaller players,” said Canstar’s data insights director, Sally Tindall.

“Most owner-occupier rates will start with a ‘6’, but we expect around 40 lenders will still offer at least one variable rate under this mark.

“You might not recognise most of the names in the list, but that shouldn’t automatically rule them out of consideration.

“If you are staring at your budget and the numbers simply don’t work, act before you miss a repayment.”

In what is surely a new bank record, Australia’s fifth-largest mortgage lender waited just three minutes to annouce it was passing on today’s 0.25 basis-point hike in full.

But it has also stolen a march on its big-four rivals - which are sometimes slower to make changes to their savings rate when the RBA hikes - saying it will also lift the interest rate on its depositi accounts.

“In response to the RBA’s announcement earlier today, we will be increasing both our variable home loan rates, and the interest rates available on our everyday variable rate bank accounts,” said Ben Perham, head of personal banking.

The changes - which come into effect on May 22 - will see customers receive an ongoing variable rate of 2.75 per cent on all balances held in a Macquarie Transaction Account and 5 per cent on balances up to $2 million held in a Macquarie Savings Account.

The Reserve Bank said there are “materially heightened uncertainties” about the outlook for domestic economic activity and inflation.

Much of that outlook appears to hinge on how long the war in the Middle East will last. With no peace deal on the table and Donald Trump amping up the rhetoric again overnight, any signs of peace look far away.

“With the conflict in the Middle East continuing, there are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast,” the RBA said.

“A longer or more severe conflict could put further upward pressure on global energy prices; this would push up near-term inflation and could also increase inflation further out as these costs are passed through and if price rises get built into longer term inflation expectations.

“But higher prices and prolonged uncertainty may cause growth to be lower in Australia’s major trading partners and also in Australia.”

There was just one hold-out of the nine-person board.

That shows just how much the landscape has changed in less than two months, when the board was split 4/5 on its deciison to lift rates in March.

While noting inflation had already started to pick up in the final months of 2025, the central bank’s monetary board said the conflict in the Middle East has resulted in “sharply higher fuel and related commodity prices, which are already adding to inflation”.

“There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services,” it said in a statement released just minutes ago.

“Short-term measures of inflation expectations have also risen.

“The bank has updated its forecasts to incorporate recent data and developments in the Middle East.

“The base-line forecast, which assumes that the conflict is resolved soon and fuel prices decline, sees underlying inflation peaking higher than was expected in February.

“It then declines as demand growth slows and capacity pressures ease in response to higher interest rates.”

And it’s a rate hike, piling on more pain for homeowners already reeling under higher fuel and grocery prices.

The decision takes the cash rate to 4.35 per cent, and the big banks are expected to waste no time in announcing they’ll pass on the increase in full.

Millions of homeowners are just 30 minutes away from finding out if the Reserve Bank will erase the benefits of three rate cuts last year with another increase today.

More important will be governor Michele Bullock’s statement a hour later, when she reveals the board’s think going forward ... and if we can expect more pain to come as the war in the Middle East drags on.

A hike today to a cash rate of 4.35 per cent would effectively finish unwinding last year’s three rate cuts and erase the repayment buffers many borrowers had built into their mortgages by not reducing their repayments across this time.

A 0.25 percentage point increase would push the average owner-occupier variable rate to 6.26 per cent, taking it above 6.25 per cent for the first time since January 2025.

The lowest variable rate on offer right now, according to Canstar, is below 5.75 per cent.

A rate hike would essentially put millions of borrowers back to square one, said Canstar’s data insights director, Sally Tindall.

“For those who kept their mortgage repayments the same following the cash rate cuts in 2025, the repayment buffer they had built up will be essentially erased by a third cash rate hike in 2026,” she said.

“While more than a year of higher repayments won’t have been in vain, the strategy will have delivered only a limited cushion against rising rates.

“Haggling should be borrowers’ first port of call, because picking up the phone can potentially produce near-immediate relief.

“However, banks aren’t handing out discounts as freely as they were a couple of years ago. If your bank won’t budge when you haggle, don’t take it personally, instead, take your business elsewhere.”

While the central banks typically aim to look through temporary supply shocks, ignoring the spillovers from the Iran war is proving harder for the RBA given price pressures were already bubbling and are now seen persisting over coming quarters.

Freight and airfares have already surged, while costs for plastics and polymers, fertilisers, detergents and paints are expected to rise.

Pass-through to other non-fuel prices is clearly starting, touching everything from building products to takeaway food

That;s the word from Luci Ellis, chief economist at Westpac Banking Corp.

This comes at a time of already elevated inflation, she Ms Ellis, previously an assistant governor at the RBA.

“Some observers point to the demand-destruction higher fuel prices can unleash via the hit to real incomes, which will dampen inflation on its own eventually,” she added.

“This is plausible, but it will take too long to assuage an RBA facing an extended period of above-target inflation.”