The Reserve Bank of Australia has raised the cash rate by a further 25 basis points to 3.6%, marking the highest level since May 2012.

It was the tenth consecutive rate rise, representing the largest and the most rapid rate tightening cycle on record.

According to Canstar, the latest rate rise reflected a 50% increase in repayments since April 2022.

A borrower with a $500,000 loan over 30 years was expected to pay about $1,051 more per month or $12,612 extra per year in repayments than they were in April 2022.

“Household budgets are definitely feeling the strain – particularly when you combine the pressure from rising rates and higher living costs,” said Canstar Editor-at-Large Effie Zahos.

“The pressure is on for households to find the money to cover a 50% increase in monthly home loan repayments. There’s no quick fix here – they’ll need to either earn more or spend less. Earning enough to cover the increase in repayments from the last 10 consecutive rate hikes would require the average Aussie to work an extra 29 hours per month. That’s almost an extra week of work.”

CoreLogic Research Director Tim Lawless said with interest rates moving higher, they were still seeing housing risks skewed to the downside.

“Arguably the full extent of the aggressive rate hiking cycle is yet to flow through to households,” he said.

“Variable mortgage rate adjustments take some time to impact existing borrowers, and there is also a larger than normal portion of mortgages on fixed terms that have been insulated from rate hikes to date. As the ‘bulge’ in fixed rate lending that occurred through 2020 and 2021 expires, more households will see their interest repayments adjust higher.

“Since interest rates started to rise, CoreLogic’s combined capital cities Home Value Index is down 9.1%. Most housing forecasts have the peak to trough decline at around 15%. Although the rate of decline has flattened out over recent months, there remains a distinct possibility the housing downturn could reaccelerate due to the risks outlined above.”

PropTrack Senior Economist Eleanor Creagh said sellers in market now were benefitting from low competition with other vendors, as buyers vied for available stock.

“The constrained level of properties available for sale has concentrated buyer demand and is ‘putting a floor’ under home prices to a degree,” Creagh said.

“Tight supply was a contributor to the rise in home prices throughout February, but with additional rate rises on the horizon, borrowing costs will continue to increase and maximum borrowing capacities will be further reduced, with home prices likely to continue declining as interest rates move higher.

“If we see an increase in stock levels in the coming months, that will remove a pillar of support for home prices, and together with the downwards pressure from rate rises, weigh on prices over the next few months.”

HIA Chief Economist Tim Reardon said the full impact of higher cash rates would not be fully reflected in economic indicators until the second half of the year, at the earliest.

“The higher cash rate is compounding the adverse impact of the rising cost of materials, labour and land as well as the increased costs of compliance due to changes to the building code,” Reardon said.

“There remains a large volume of work underway that will be completed in 2023 which is obscuring the adverse impact of rate rises on other indicators such as unemployment and economic growth. By continuing to raise rates the RBA will inflict further unnecessary pain on the $120 billion housing sector and related industries.”