RBA D-Day: Borrowers wake up to $2,800 hike nightmare

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RBA D-Day: Borrowers wake up to ,800 hike nightmare

RBA governor Michele Bullock is expected to hold a tense monetary policy meeting on Tuesday. Photo: John Feder/The Australian.

The Reserve Bank is expected to throw in the towel on borrowers today with a hike – but several experts are warning “now is not the time to raise rates” for households squeezed by rising costs.

This is as a 0.25 percent increase in the rate of money is widely expected at the meeting of the Reserve Bank’s monetary policy board today, which will push the variable rate of the landlord over 6 percent and for the first time since April last year (6.01 percent).

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The average $736,259 home loan would jump to $4,410 a month if the full rate hike were passed on by lenders today, according to Finder — amounting to $2,805 more per year.

Ten days ago, Aussie home owners were confidently absorbing February’s 0.25 per cent increase without a release, with many experts predicting rates won’t move again until May.

Then the outbreak of the US-Israel war with Iran began to hit home and on March 13, the probability increased significantly to 71% expected to increase today in the broader market.

The ASX 30 Day Interbank Cash Rate Futures March 2026 contract was trading at 96.07 on Friday, reflecting expectations that the RBA will increase to 4.1 per cent.

But Finance Brokers Association of Australia chief executive Peter White warned the RBA to show restraint, warning “Australians are yet to face the cost of rising costs of living predicted to come soon as a result of the Middle East conflicts”.

“We expect that not only will fuel costs rise, but this will spill over into other commodity prices and could add hundreds of dollars every month to the average household budget. If interest rates rise, many homeowners may struggle to meet the increased payments.”

For the average Australian household with a $600,000 mortgage, the total monthly damage will reach $181 from the February and March rate hikes alone, according to Canstar.com.au figures.

For those with a loan of $700,000, the numbers are even worse, as March alone is scheduled to add $106 more every month and the combined increase is $211.

The finder’s data showed payments on the average $736,259 home loan would jump to $4,410 a month if the full rate hike were passed on by lenders today – up to $2,805 more a year in interest costs compared to January.

Mortgage payments on an average home loan of $736,259. Source: Find.

Chief consumer research analyst Graham Cooke said “between instability in the Middle East pushing up fuel prices and the RBA’s need to tighten inflation, it’s a high-level guessing game for everyone”.

“There is no meeting in April, so the board may step up now. The increase in rates will put a lot of pressure on the financing of households which has already decreased.”

But despite the big four banks willing to hike, Finder’s panel of 37 economists told a different story on Friday with 62 percent predicting a hold and only 38 percent a hike.

Queensland University of Technology professor Noel Whittaker was among those urging the RBA today to be on the alert.

“This is not the time for the Reserve Bank to raise interest rates.” It is not helpful for Australian homeowners to pay more on their mortgages to fight inflation that is not coming from this country,” he warned. “The smart course would be to hold rates steady and wait until the next meeting to see how things play out.”

Leanne Pilkington of Laing+Simmons agreed, saying the war in the Middle East was affecting oil prices for now but has the potential to cause economic damage as well.

“We think the sensible approach is to hold prices steady until a clearer picture emerges.”

Provided by Real Estate Graham Cooke, head of consumer research at Finder

Graham Cooke, head of consumer research at Finder, said there was no monetary policy meeting in April so the RBA’s board could be motivated to act now.

Canstar’s director of data, Sally Tindall, said “consumer confidence has been hit by global events as some households are already making adjustments in anticipation of tough times ahead”.

“The RBA may decide to wait for a clearer reading on the wider impact of the Middle East war on the Australian economy before acting. There is no doubt there will be a strong debate in the chamber. It may be one of the rare meetings that leads to a decision to leave.”

Banks have not been sitting around waiting to see what happens, as 27 lenders have already raised at least one fixed rate ahead of the RBA Board meeting.

Canstar data director Sally Tindall urged borrowers to give themselves their reduced rate by shopping around for a better deal or asking their lender for one.

AMP Bank chief economist Shane Oliver was among those who believed a hike was inevitable given rising energy prices, as did My Housing Market chief economist Dr Andrew Wilson who said “the RBA’s latest news shows higher interest rates in the face of rising and rising inflation – as oil plays out”.

Ms Tindall urged borrowers to be smart about any increase by stating their case with their lender – “negotiate even a small discount” or, failing that, get the money back on a better deal to cancel out the impact of the rate hike.