How interest rates have evolved over the past 18 months

The latest Reserve Bank of Australia (RBA) data has shown the impact the RBA's cash rate rises have had on the mortgage market.

The key is to compare average interest rates for all outstanding loans in April 2022 – the month before the first rate rise – and August 2023 – the most recent month for which we have data.

During that time, the RBA increased the cash rate by 4.00 percentage points. Interest rates for outstanding loans have, on average, increased by less than that amount, in part because some loans were fixed at lower rates.

For owner-occupied loans, rates have increased by an average of:

• 2.82 percentage points for principal-and-interest loans

• 3.31 percentage points for interest-only loans

For investment loans, rates have increased by:

• 2.83 percentage points for principal-and-interest loans

• 2.73 percentage points for interest-only loans

Future interest rate hikes can't be ruled out. The conflict in the Middle East may lead to higher oil prices, and therefore higher petrol prices and higher inflation. In the RBA's cash rate meeting earlier this month, board members noted that “some further tightening of policy [i.e. rate rises] may be required should inflation prove more persistent than expected”, according to the meeting minutes.