RBA announces latest cash rate call

The last time the cash rate reached 4.60 per cent was in November 2011, with the official rate now sitting at a 15-year high.

The policy decision was unanimous.

The move was widely predicted by the four major banks and financial markets and comes amid stronger-than-expected domestic inflation pressures and an economy running beyond capacity.

In its post meeting statement, the board said the decision reflected a materialisation of risks that had previously been identified as capable of pushing inflation higher.

“Since the previous meeting, some of the upside risks to inflation are materialising. There have been further disruptions to global oil supply and recent data suggest that growth and inflation in Australia have been higher than expected. This inflation impulse is in addition to the effect of capacity pressures in the economy," the statement read.

“But inflation is still too high and the board judged that, in light of recent developments, a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period.”

The board also retained an explicit tightening bias, signalling it would be prepared to lift the cash rate again if conditions required further action to return inflation sustainably to target.

“The board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed," the statement read.

Aggregator head urges borrowers to review loans

Industry leaders have urged borrowers to assess the impact of the cash rate increase promptly, warning that higher repayments and reduced borrowing capacity will make professional guidance increasingly important.

Executive director of major aggregator Connective Mark Haron said the decision would be unwelcome for households already contending with elevated mortgage costs.

“Another rate rise will be difficult news for borrowers already managing higher living costs and mortgage repayments. For those households, the focus needs to be on understanding the impact rather than panicking about it,” Haron said,

“Brokers have an important role to play here. They can review a client’s loan, compare alternatives, and help borrowers work out what practical options are available before financial pressure becomes more difficult to manage.”

He added that the consequences also extended to people considering a property purchase.

“For buyers, another increase will also affect borrowing capacity and repayments, so getting clear advice early matters. This is a time when borrowers need facts, options and a plan and that’s exactly where a good broker can help,” he outlined.

Higher rates sharpen competition

Meanwhile, CEO of major aggregator Finsure Simon Bednar said borrowers and the mortgage industry should prepare for interest rates to remain restrictive for an extended period.

“I think the important factor coming off the back of this week, regardless of whether it’s a hold or increase decision, is that Australian borrowers are likely to be dealing with a higher-rate environment for longer, putting additional pressure on household budgets and borrowing capacity,” Bednar said.

“The current environment is creating increasing pressure across the mortgage market, but that pressure isn’t necessarily being felt equally.”

He said brokers were also operating in an increasingly competitive landscape as banks pursue a larger share of loans through their proprietary channels.

“Brokers are experiencing heightened competition from bank proprietary channels, with the mortgage industry on notice that banks are wanting to increase their propriety in flows,” he outlined.

“In a higher-rate environment, that can create an increasingly unbalanced playing field for mortgage brokers who are competing for the same customer.”

Bednar said the response for brokers should be continued engagement with clients throughout the loan term.

“That makes the relationship brokers have with their clients more important than ever. Brokers cannot afford to only be present when a customer is ready to refinance or purchase a property,” Bendar said.

"They need to remain close to their customers throughout the life of the loan, checking in, understanding how their circumstances are changing and making sure they continue to have the right solution.”

Inflation keeps further hikes in play

Chief executive of major aggregator and brokerage Mortgage Choice Anthony Waldron said the latest increase was consistent with recent inflation data.

“The Reserve Bank’s decision to raise the cash rate is unsurprising. It comes off the back of the latest CPI data, which shows inflation has remained stubbornly high,” he said.

“RBA officials have made it clear that the board is determined to bring inflation down. Until the RBA is satisfied that inflation is trending in the right direction, there is a risk that rates could rise further.”

Waldron said the increase could add about $90 a month to repayments on a $600,000 variable-rate mortgage and urged existing borrowers to test whether their loan remained suitable and competitively priced.

“My advice to borrowers is to find out whether their home loan is still competitive. If it's been over a year since you reviewed your home loan, speak to your mortgage broker to understand whether it's still the right one for you,” he said.

“If you’re in the market to buy your first or next home, speak to a mortgage broker to understand how the latest cash rate hike will impact how much you can borrow.”

Buyer confidence at risk

Loan Market Group executive chairman Sam White said the increase could weigh heavily on buyer confidence, even though the RBA’s stated focus on taming inflation had made the move broadly expected by the market.

“Today’s cash rate increase could be the straw that breaks the camel’s back for buyer confidence. The RBA has stated it’s prioritising bringing down inflation, which meanst today’s announcement hasn’t come as a shock to the market,” White said.

“With external pressures impacting cost of living, rising construction costs, uncertainty around economic policy and AI - one rise now is worth two in the normal world.”

White said the board should now assess the full effect of the latest rate decision on households and the wider economy before determining its next move.

“I hope the board now takes time to evaluate the impacts of this increase.”

Where to from here?

Financial markets were overwhelmingly expecting a 25-basis point increase to 4.60 per cent, with the ASX 30 Day Interbank Cash Rate Futures as of 25 September trading at 95.425, indicating a 90 per cent probability of a hike.

The shift to a renewed tightening cycle has been driven by persistently high underlying inflation, a renewed surge in fuel costs sparked by the ongoing military conflict in the Middle East and increasingly hawkish rhetoric from the RBA’s senior leadership.

In July, underlying inflation, the central bank’s preferred metric, came in at 3.6 per cent, far higher than both the major banks and the RBA expected.

Following the inflation print, all four major banks replaced their extended hold forecasts and lined up behind a unified call that the cash rate would be raised by 0.25 per cent in September.

However, they have diverged on the cash rate outlook moving forward.

The Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac all predicted a single September hike, while Australia and New Zealand Banking Group (ANZ) is forecasting another hike in November.

The next cash rate decision will be announced on 3 November 2026.

[Related: Majors hold firm on September rate rise despite jobless uptick]