Reserve Bank is offering ANOTHER increase for Australians with a mortgage: here’s how much more you’ll pay

Millions of Australians have been hit by another brutal mortgage crisis after the Reserve Bank of Australia hiked interest rates, pushing the cash rate to 4.35 per cent.

Governor Michele Bullock warned that more increases are coming as inflation threatens to rise further due to the war in Iran and high government spending.

The RBA said eight of nine board members supported the 0.25 percentage point increase, with one vote remaining.

“Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios the conflict contributes to global and domestic inflation,” Bullock told reporters on Tuesday.

‘If left unchecked, higher costs will become embedded in price and wage-setting decisions.

“These second-round effects could lead to even higher and more persistent inflation and, if so, further monetary policy tightening would be needed to bring inflation under control.”

For an owner-occupier with a $600,000 mortgage and 25 years left at the start of this year’s rate increases, another 0.25 adds $91 to their minimum monthly payments. The total increase over the three rate hikes since February would be $272 per month.

The increase will increase the average variable interest rate for owners and residents to 6.26 percent, bringing it above 6.25 percent for the first time since January 2025.

She said the government must keep spending under control to avoid further pressure on inflation. Just hours after it came to light, Treasurer Jim Chalmers is considering cost-of-living relief of between $200 and $300 for Australians who earn a wage or salary and pay tax.

“If governments are spending a lot of money and we’re running into capacity constraints, they need to think about whether there are ways they can help the inflation problem by looking for ways to limit demand,” Bullock said.

“I personally think the treasurer, privately and publicly, is focused on that, but it’s not just the federal government, it’s the state governments as well.”

The decision to raise interest rates has been criticized by economists and the government as putting further pressure on Australians battling the high cost of living.

“Australians are already paying a high price for the war in the Middle East and this decision will make it even more difficult,” Chalmers said in a statement.

‘It will increase the pressure families and businesses are under at a time of ongoing global instability.’

Chalmers then blamed the interest rate hike on the United States’ conflict with Iran.

“What we saw in the month of March was largely a story of higher gasoline prices before our fuel tax cut came into effect. Higher gasoline prices have everything to do with the war in the Middle East,” he said.

‘Any objective observer would now conclude that. When it comes to decisions being made in Washington DC, or even in Tehran, Australians are hostage to the decisions being made about the conduct of this war and the end of this war.”

The vote has also been labeled a ‘wrong decision’ by Matt Grudnoff, senior economist at The Australia Institute.

“Higher interest rates will do nothing to open the Strait of Hormuz. Higher interest rates cannot change the world oil price or reduce fuel prices,” he said.

“It has chosen to do something, even if that only makes things worse, rather than risk being accused of inaction.

‘The only tool the RBA has to fight inflation is to change interest rates. But interest rates are not effective in stopping inflation caused by supply shocks.”

It’s another blow to Australians after the Australian Bureau of Statistics revealed last week that headline inflation rose to 1.1 per cent in March.

Annual inflation is 4.6 percent, up from 3.7 percent, marking the fastest annual rate of price growth since September 2023.

Shane Oliver, AMP’s chief economist, told the Daily Mail exactly how the rate increase will impact Australia’s household budgets.

“For someone with an average mortgage today, which is about $660,000 today, it’s going to cost them an extra $110 a month in interest payments, which works out to about $1,300 a year,” Oliver said.

‘So it’s clear that this will be a blow to household budgets, especially those with high mortgages.’

For those without a mortgage, Oliver says the situation is ‘not that bad’, with higher interest costs having much less impact.

“Renters may face some upward pressure on their rents, but that is not necessarily the case as landlords try to cover their interest,” he added.

“In fact, many Australians could benefit from higher bank deposit rates, as bank deposit rates are also likely to rise.”

Mr Oliver added that mortgage payments will rise once borrowers get a loan, but higher interest rates often lead to lower property prices, which could be a bright spot for potential homebuyers.

The economist said the overall effect is even more negative because Australian households, on average, have more debt than they have in bank deposits.

“The value of total household debt in Australia is almost double the value of household bank deposits for the household sector as a whole,” Oliver said.

‘It is negative, and that will put a brake on spending in the economy.

“So if you’re a business owner, a small business owner, people are going to have less money and less money to spend.

“That could mean lower demand for your products, and fewer people coming into your cafe, especially when you combine that with petrol prices, which I know are not at their all-time highs, but could rise again given the situation in the Middle East.”

In a statement explaining its decision, the RBA noted that inflation had risen “materially” in the second half of 2025 and was subsequently hit by the conflict in the Middle East.

“The board assessed that inflation is likely to remain above target for some time and that risks remain tilted to the upside, including inflation expectations,” the report said.

“It was therefore considered appropriate to increase the cash rate target.”

The decision comes just a week before the Treasurer is due to announce the Labor government’s fifth federal budget.

“The uncertainty and volatility in the global economy means there is an even greater premium on responsible fiscal management,” he said on Tuesday.

“The budget is already more than $233 billion better than we inherited because the government has found savings, controlled spending growth and increased banks’ revenues.

“In the coming Budget, we will continue the record of responsible economic management by saving more than we spend and making all upward revisions to revenues.

“This Budget will focus on fuel security, tackling inflation, boosting productivity and resilience and managing global economic uncertainty, and today’s decision underlines why this is so important.”