The RBA has just lifted interest rates again and, if you’re already juggling rent, groceries and a loan repayment (or dreaming of one), it’s totally fair if this feels bleak rather than a good thing for the economy.
Here’s what actually changed and how it filters into real life for young Aussies.
What did the RBA just do?
The Reserve Bank’s Monetary Policy Board has increased the cash rate by 25 basis points, taking it from 3.6 per cent to 3.85 per cent. The cash rate is basically the interest rate that influences how much it costs banks to borrow money, and that then shapes what they charge you on home loans and what they pay you on savings.
In its statement, the Board said that “while inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025”, and that some of that rise reflects “greater capacity pressures”, meaning the economy is still running pretty hot. It also warned inflation is “likely to remain above target for some time”, so today’s move is supposedly about trying to cool things down before price rises become too hard to shift.
How the RBA hike affects you if you’ve got a mortgage (or want one)
If you’re on a variable‑rate home loan, your minimum repayments will go up once your bank passes on the hike, which big lenders usually do within a few weeks. With the average owner‑occupier mortgage sitting around $694,000, even a small change in the rate can add hundreds of dollars a year to what you’re paying.
Consumer finance expert Joel Gibson from Zyft told PEDESTRIAN.TV that “today’s rate hike is going to hurt, and there’s no way around that” and estimated that “for the 35 to 40 per cent of Australians with a mortgage, we’re talking an extra $115 a month on the average $694,000 loan”.
“Over half of mortgage holders were experiencing mortgage stress even before this decision, and today has just made an already‑fragile situation worse,”he said. Everyday essentials like groceries, energy and insurance “are taking a bigger bite out of household budgets” and people often underestimate how much goes to those fixed bills.
Finder’s head of consumer research Graham Cooke told P.TV that “as rates eased, mortgage stress started to fall, but rental stress has stayed stubbornly high”, and said homeowners “were finally catching a break” before today. He warned that “after this rise, homeowners will lose around a third of the relief they’ve gained so far”.
What the RBA hike means for renters
The cash rate doesn’t change your rent tomorrow, but it still matters when the rental market is cooked. Higher interest costs for landlords can feed into rent increases over time, especially when vacancy rates are low and people are competing hard just to get a place.
Cooke said that “this rate rise shouldn’t hit renters as directly as homeowners”, but pointed out that landlords have already been able to pass on higher costs over recent years, which is why rent stress has stayed “stubbornly high” even when some mortgage stress eased.
Gibson on the other hand told P.TV that “renters won’t escape either” and that “landlords will pass on what they can”. He noted that median weekly rents nationally are “around $650 and climbing”, and highlighted Domain data showing renters near Sydney CBD need around $216,000 a year to live comfortably, compared with about $112,000 on the fringes — a gap he says is “slamming the door shut on anyone trying to get a foothold in the market right now”.
Unions are honing in on how the move feeds straight into housing costs. “Housing is one of the biggest cost-of-living pressures, and today’s rate rise will make that worse for renters and home buyers,” said ACTU Secretary Sally McManus.
“Professional landlords should absorb these higher interest rate costs and not pass them on to renters, who are already struggling – especially given landlords are already benefiting from high house prices and the current tax settings,” the ACTU statement said.
“Working people, who are renting, are subsidising landlords. They pay higher effective tax rates than landlords who benefit from negative gearing and capital gains tax discounts. It’s not fair to now turn around and slug working people with higher rents because of today’s rate rise,” the statement said, warning that “this only makes housing even less affordable for young Australians and just increases inter-generational inequality”.
“Average workers like nurses and teachers can’t afford the rents to live in the communities they serve, and this decision will only make that worse.”
What the politicians are arguing about
Treasurer Jim Chalmers said in a media release that today’s call by the Board will be “difficult news” for millions of Australians with a mortgage.
“We know many Australians are doing it tough which is why we continue to roll out responsible cost of living relief, including a further tax cut later this year and another one next year,” the statement read.
He added that the government is “doing what we can to strengthen the budget and address our longstanding productivity challenge”.
He also pointed out that the RBA’s Statement on Monetary Policy “does not mention government spending” and that it “makes it very clear the pressure on inflation is coming from private demand”, after the Bank upgraded its near‑term growth outlook on the back of stronger private demand.
The Greens are using the decision to hammer Labor on housing and tax. Greens Economic Justice spokesperson Senator Nick McKim said “renters and mortgage holders are getting smashed by the RBA, but it’s Labor’s failure on inflation that is responsible” and described the rate rise as “pure profit for the big banks, while mortgage holders and renters are being pushed deeper into pain”.
“Labor has chosen to protect billions in tax handouts for property speculators instead of helping renters and first home buyers,” he claimed.
“Those settings drive up house prices, push up rents, and keep inflation high.”
Jobs, wages and the tiny upside (for some)
Rate rises don’t just hit housing; they are designed to slow the whole economy down a bit. “A cash rate increase pushes up mortgage repayments (especially for variable rate borrowers), squeezing household budgets, and typically cooling housing demand and price growth,” Associate Professor at UNSW, Evgenia Dechter, told P.TV.
“Renters and young people may not feel it immediately through repayments, but can feel it over time through weaker hiring and slower wage growth, as higher interest rates raise borrowing costs and slow overall economic activity.”
There is one small upside if you’re sitting on savings rather than debt. “The higher cash rate can be good news for self-funded retirees, as it lifts the interest earned on savings accounts and term deposits,” Cooke said.
But he warned that ongoing hikes also increase the chance of higher deeming rates, which “could reduce fortnightly payments for some pensioners at a time when everyday costs are still elevated”.
For everyone else trying to protect their bank balance, Gibson’s take is that “skipping your $5 coffees won’t close this gap fast enough” and that “real savings come from reviewing energy plans, comparing insurance and shopping smarter for groceries, because those are the bills everyone has to pay”.
What happens next?
RBA governor Michele Bullock is keeping things open‑ended. She said “the board has taken a cautious approach. They have made one rate rise this time and we’ll observe now what happens to financial conditions”, adding that “we’re already observing some tightening in financial conditions including through the exchange rate … we’ll wait and see what the response of some of the credit, housing, those sorts of thing”, per ABC.
She summed it up with: “I’m not predicting there’ll be more rate rises but I’m also not saying that if inflation does remain too high, that there mightn’t be.”
Bullock also stressed that the Bank isn’t just following market bets. “I don’t dismiss market expectations, but I’m also not driven by them”, she said, explaining that “the board will monitor and make its own decisions about what’s appropriate and the market is taking a view on that, which is fine, but I won’t basically be driven by the market”.
On whether government spending is to blame, she kept out of the politics. She said the RBA looks at total demand “which is public and private” and takes fiscal policy “as given”, noting that “private demand has turned out to be much stronger than we had been forecasting” and “we think there’s excess demand”.
For now, her bottom line is that letting prices stay high for longer is “not an acceptable outcome”, and the board “now thinks it will take longer for inflation to return to target”.
What that means in practice is more uncertainty. Borrowers, renters and young people trying to get into the market are being asked to sit tight while the RBA waits to see if this one move is enough, knowing that if inflation doesn’t budge, more stress is still on the table.
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