The Reserve Bank of Australia (RBA) has raised the cash rate by 25 basis points, continuing its record run of rate rises. The latest rate hike brings the official cash rate to 3.85% − the highest in about 11 years.

RBA governor Philip Lowe announced the increase at the May Board meeting and cited high inflation and a tight labour market as reasons for the hike.

“Inflation in Australia has passed its peak, but at 7% is still too high, and it will be some time yet before it is back in the target range,” Lowe said in a statement.

“Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today.”

The shock move comes after the RBA hit pause on rate rises last month which gave borrowers a short-lived reprieve.

Compare the Market’s General Manager of Money, Stephen Zeller, said the Board’s decision to raise the cash rate again was a necessary evil.

“Even though we can see these aggressive rate increases have had some effect on inflation, we’re still nowhere near the target range of 2-3%,” Mr Zeller said.

“Although it was a necessary evil for the greater good, many borrowers are going to be in a world of pain.

“A person with a $600,000 mortgage could be paying $1,351 more each month than at the start of May 2022, so it really does pay to do your research and be prepared for that fixed rate cliff.

For Australians on a variable rate home loan, here’s how a 25 basis point increase in the cash rate, if passed on by the lender in full, would affect monthly repayments:

Mortgage size	25 basis point increase to 6% p.a.
Mortgage size	Increase in monthly minimum repayments	Increase over the life of the loan
$500,000	+$80	+$28,760
$600,000	+$96	+$34,512
$750,000	+$120	+$43,140
$900,000	+$144	+$51,768
$1,000,000	+$160	+$57,520
Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 5.75% p.a; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees.

Australians with a $600,000 variable mortgage may soon be paying $1,351 more each month than they were at the start of May 2022, following a 375 basis point jump in just 12 months.

Mortgage size	Increase in average monthly repayments since the start of May 2022 (375 basis points)
$500,000	+ $1,126
$600,000	+ $1,351
$750,000	+ $1,689
$900,000	+ $2,027
$1,000,000	+ $2,252
Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 2.86% p.a in May 2022; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees.

How high will interest rates go?

The latest increase marks the eleventh rate rise in the space of a year. The RBA began raising interest rates in May 2022 when the cash rate was just 0.35%. It’s now at 3.85% which is an 11-year high (since May 2012).

As we did in May, June, July, August, September, October, November, December, February and April, Compare the Market is tracking interest rate movements from some of Australia’s biggest banks and lenders. How are the banks moving? Watch this space to find out.

All banks and lenders may not be included in this list. We’ve included the lenders on our panel.

The information on this page is general only – check with your lender for further details on their interest changes and how you might be affected.

RBA rate rise May 2023: The banks passing on the 25 basis point increase

How high will interest rates go?

Big four banks rate rises

ANZ

Commonwealth Bank

NAB

Westpac

Other major banks rate rises

AMP

Bank of Melbourne

BankSA

Bankwest

Bendigo & Adelaide Bank

BOQ

ING

Macquarie

ME

St. George

Virgin Money

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Written by Megan Birot

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