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*Newsflash* Reserve Bank lifts cash rate for 9th time...

In today's Reserve Bank meeting, the first for 2023, the Reserve Bank has announced the another 0.25% increase in the cash rate. This is the 9th consecutive increase by the Reserve Bank and puts the cash rate at it's highest level in decades now sitting at 3.35%.

The Reserve Bank continues to be 'resolute' in fighting inflation by way of rate rises, with it's aim to return inflation to a level of 2% - 3%. Inflation is currently sitting at 7.8% to the end of December.

Many banks are expected to quickly follow suit by passing on this rate rise in the form of higher variable rates.

For many home loan customers, it is not the news that they were hoping for to start 2023. With many budgets already tightly squeezed, this increase could place even further pressure on families across Australia.

Not only will it increase repayments on variable rate home loans, it also means that the borrowing power of home loan customers continues to reduce as the bank assessment rates (the rate at which they assess customer borrowing power) also increases. Increasing assessment rates means lower borrowing power for all.

For some home loan customers who have purchase properties off the plan pre Covid or during Covid, the daunting prospect now presents itself where many cannot borrow the amounts that they could two years ago. For some, they are now falling short.

Again, with nearly 60% of home loan customers coming out of very low fixed rates between now and the end of the year, these customers will directly feel the shock of jumping from 2% to above 5% in home loan rates. Current fixed rates for many banks are close to 6% or between 6% and 7%.

While we all continue to hope for the light at the end of the tunnel, the Reserve Bank may still continue to raise the official cash rates over coming months if it does not see the desired drop in inflation. There is likely more pain to come for many home loan customers this year. We await that light to present itself.


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