Tuesday 7 June 2022 05:40 AM Reserve Bank increases interest rates, Commonwealth, Westpac, ANZ, NAB set to ... trends now

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The Reserve Bank of Australia has hiked the cash rate to 0.85 per cent on Tuesday, meaning mortgage holders will be forced to shell out even more on their monthly repayments as the cost of living soars.

The 0.5 per cent jump is just the second rate rise in 11 years after the central bank moved from the record low setting of 0.1 per cent in May to curb spiraling inflation.

If banks pass on the increase in full, Australians paying off a $600,000 home at a variable rate will now have to handover about $127 a month more with their repayments going from $2,890 to $3,017.

The Big Four financial institutions including the Commonwealth Bank, ANZ, Westpac and NAB all raised interest rates in line with the RBA last month and are expected to do the same again. 

Further rapid-fire rate hikes are widely predicted to follow every month until at least the end of the year. 

Economists had widely predicted the cash rate to lift by 0.25 or 0.40 per cent with the shock move indicating inflation could be even worse than first thought.

RBA Governor Philip Lowe now has no other way to get cost of living pressures under control after the Australian government handed out more than one third of a trillion dollars in stimulus during the Covid pandemic in 2020 and 2021.

The generous spending coupled with the record low interest rates to spur on economic growth, has seen inflation in the year to March surge to 5.1 per cent - the fastest rise 2001.

Aussie families are feeling the pinch with some fruit and vegetables up 50 per cent since the start of the year, petrol prices over $2 a litre and wholesale energy bills skyrocketing by 141 per cent.

Upward pressure on prices has also been compounded by several other global and

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