The RBA just raised rates. It affects more than your home loan
For the fourth time this year, the Reserve Bank of Australia (RBA) has lifted the cash rate by 0.25 of a percentage point in a bid to bring inflation under control.
While the RBA's decisions are most felt through mortgage repayments, their impact extends well beyond home loans.
Here's a breakdown of how the latest increase will affect households differently, depending on whether Australians are paying off a mortgage, renting, or relying on savings.
Where are we at with the cash rate?
To first understand how the cash rate impacts different parts of our hip pocket, let's take a step back.
The cash rate, set by the RBA, is Australia's official interest rate charged on unsecured overnight loans between banks.
In simple terms, it's how much it costs banks to borrow from each other. The RBA's decision to increase the official cash rate makes it more expensive for lenders to borrow money.
That means banks will almost certainly charge customers a higher interest rate to still make a profit because they are paying more to borrow the money in the first place.
On Tuesday, the RBA increased the cash rate to 4.6 per cent in an attempt to slow down inflation in the economy.
Commonwealth Bank head of Australian economics Belinda Allen says the central bank has lost its patience, given inflation has sat above the target band for most of the past six years.
"Higher interest rates make borrowing more expensive and saving more attractive," Ms Allen says.
"That tends to slow household spending and business investment, reducing some of the demand pressures in the economy and, over time, helping bring inflation back towards the RBA's 2–3 per cent target."
How the cash rate increase could affect you
Mortgages
Rents
Savings
Australian dollar
Car and personal loans
Is this the last rate hike for the year?
We don't know.
The majority of analysts surveyed by Bloomberg expect the RBA to be done with hikes for the rest of the year.
Westpac, NAB and CBA are also in agreement.
In a weekly market update last Friday, Dr Oliver summed up the majority view.
"By the time it gets to the November meeting, there is likely to be more evidence of a cooling economy, falling home prices, a softer jobs market and rising recession risks, so we don't think a second hike let alone a third will be necessary," he wrote.
ANZ is the only major bank so far officially tipping a November rise as well, alongside HSBC and UBS.
Ms Allen says it all depends on the near-term movements in inflation data.
The RBA will deliver its next cash rate decision on Tuesday, November 3.
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