Mortgage holders hit with third rate rise but the real pain is delayed

Australian interest rates have risen again for the third consecutive time, but an expert points out the rate pain is only just beginning.

Canstar data insights director Sally Tindall told NewsWire it takes some time for interest rate hikes to flow through the economy.

“The banks calculate your interest owing every single day but they don’t ask you for that extra money straight away,” she said.

“The bank will send you a letter outlining new monthly repayments if they have changed but they give people time to prepare.”

In grim news for households hurting now, they are yet to be paying for all three of the 25 basis point rate hikes announced by the Reserve Bank this year.

According to Ms Tindall, Commonwealth Bank gives customers at least 20 days from when the letter is sent, while the other big four take at least 30 days.

“In reality, it is two to three months before mortgage holders pay extra. So a lot of people aren’t paying for the March hike just yet,” she said.

This means households may only currently be paying for the first of three interest rate hikes.

Ms Tindall says while this can get confusing for Australians, ultimately is a good thing as banks give customers time to prepare for any mortgage rate hikes.

How many times has the Reserve Bank hiked rates?

Following a two-day meeting, the RBA announced last Tuesday it had raised the official cash rate by a further 25 basis points, taking it to 4.35 per cent.

Eight of the nine board members voted to increase the cash rate, while one member voted to leave the cash rate target unchanged at 4.10 per cent.

This was the third straight increase, following cash rate hikes in both February and March by 25 basis points each.

In total, the 75 basis points of additional rate hikes means households are back where they were in January 2025, before the central bank cut interest rates three times throughout the year.

The board said inflation was too high at 4.6 per cent – well above its target range of two to three per cent – and suggested further rate hikes could be on the agenda, saying it would pay close attention to future data and the global economic climate.

RBA governor Michelle Bullock told Aussie households what they already knew – the US-Iran war was hurting their budgets.

But she said letting inflation run high was not the answer.

“Australians are poorer because of this shock to oil prices. We are poorer and there is no way out of that, but the trade off is much worse,” she said.

The cost of fuel rapidly rose in March as the critical Strait of Hormuz – where about 20 per cent of global daily consumption passes through – was blocked off, severely impacting how much crude oil gets through the region.

“Now I understand this is a really difficult time for households who are already facing higher fuel prices and other cost of living pressures, but we must get on top of inflation now so that it doesn’t get away from us,” Ms Bullock said.

When will the banks start charging higher interest rates

According to Canstar, more than 40 lenders have already announced they will pass on the full 25 basis point rate hike for mortgage holders.

This does not account for smaller lenders who may not publicly announce they are lifting rates.

These included the major four banks, which will pass on the interest rate pain from May 15.

CommBank group executive retail banking Angus Sullivan said CBA recognised many customers were already managing higher living costs, and further rate increases could add to that pressure.

“Our focus is on supporting customers to stay on top of their finances, with practical tools, clear guidance and access to help when it’s needed,” he said.

In an update, Westpac also told mortgage holders they were passing on the interest rate pain, but would also lift rates for savers.

The total variable rate with a five-month introductory rate increasing to 5.25 per cent for new customers applying online.

“The conflict in the Middle East continues to create global uncertainty and impact inflation,” Westpac chief executive of consumer Carolyn McCann said.

“Right now our focus is on helping customers through the current economic environment.

“We encourage customers who are feeling stretched to reach out early. We have a range of support options available and our teams are ready to help.

“We’ve also increased deposit rates which will provide some relief for savers who are navigating higher living costs.”

NAB and ANZ also told customers they would pass on Tuesday’s interest rate hike.

What will it cost mortgage holders?

Canstar analysis shows the RBA’s increase will add about $91 to the monthly repayments of a $600,000 mortgage with 25 years remaining.

Across all three hikes, it totals an extra $272 a month. If the cash rate remains steady for the next 12 months, that’s an extra $3265 over the next year in mortgage repayments, compared to if there had been no hikes in 2026.

While rates only returned to where they were in January, Ms Tindall says it might not be as easy for households to keep paying their mortgage.

“The cost-of-living has gone up since January 2025. Grocery prices have risen, electricity rebates ended and fuel went nuts, so the pressure is actually higher this time around,” she said.

“For some households it will be a mountain that is too high to climb and they won’t have the funds for it.”

Ms Tindall said it was a tale of two cities, with some households ahead on their mortgage while others were struggling to keep up with the cost-of-living.

For Australians feeling the pressure she said they could speak with their bank or the free and independent national debt hotline.