Homeowners with mortgages are bracing for the fourth interest rate hike of the year this afternoon. If this comes to fruition, it will put borrowers in a position millions of them have never been in.
The three rate hikes already this year have reversed the cuts imposed by the RBA in 2025. Another rise will take rates to their highest level in 15 years.
And this one will hit differently.
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The majority of borrowers did not reduce their mortgage repayments last year when the interest rate on their home loan fell. Because most banks (but not Westpac or Macquarie) do not automatically cancel your payment after a rate cut, but the difference is in paying off the loan principal, which usually builds up slowly in a redraw facility. But for the first time in this latest bullish cycle, today’s hike will actually increase the amount these borrowers will have to pay for their monthly mortgage payments.
In February this year, the Commonwealth Bank said Yahoo Finance that only 11 per cent of customers reduced their direct debit repayments after the third rate cut in August last year, while ANZ said 14 per cent of customers had chosen to reduce their repayments since the rate cuts began and NAB also noted that 80 per cent of customers had retained their repayments after the rate rises.
But when banks take the next step, it will be felt in the form of higher repayment.
LIVE BLOG: RBA interest rate decision
This is something independent housing economist Cameron Kusher noted ahead of the RBA’s second day of meetings on Tuesday.
“After the cash interest rate was cut three times in 2025, not everyone would have necessarily reduced their mortgage payments and some people were still stuck on ultra-low fixed rates during the pandemic,” he wrote.
“The three rate hikes so far this year have brought the interest rate back to the highest recorded as a result of the pandemic. Any further rate hikes from here, including the one I expect tomorrow (Tuesday), will impact almost all mortgage holders.
“I believe the impact of this and any future interest rate increases will have a much greater impact on mortgage holders than previous ones.”
The positive side, at least for borrowers, is that the impact on the economy could pave the way for reductions sooner than the market expects.
“This will likely have a much broader impact on the economy and I believe it will require future rate cuts sooner than the market is currently pricing in, which is no rate cuts for the next 18 months,” Kusher said.
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