Two consecutive interest rate rises from the Reserve Bank of Australia, combined with elevated petrol prices, have increased costs for the 3.3 million Australian households with a mortgage. The RBA has raised the official cash rate in both February and March, while fuel costs have increased by more than fifty cents per litre over the past six months.
TLDR
The RBA raised the cash rate to 4.10% in March, the second consecutive 25 basis point hike. A household with a $500,000 mortgage pays an additional $79 per month from the March increase. Combined with petrol at $2.30 per litre, the increased costs are affecting household budgets and consumer confidence, which has fallen to its lowest level since the start of the COVID-19 pandemic.
KEY TAKEAWAYS
Approximately 3.3 million Australian households with a mortgage are facing higher costs, impacting household budgets.
March Rate Hike Increases Mortgage Repayments
The Reserve Bank raised the cash rate to 4.10% on Tuesday, a 25 basis point increase that followed an identical rise in February. The board voted 5-4 in favour of the decision, indicating a division among members regarding the economic outlook.
For a household with a $500,000 mortgage on a standard variable rate, the March increase translates to an additional $79 per month in repayments. Combined with the February hike, the two-month total comes to approximately $158 in additional monthly payments.
For larger mortgages, the increase in absolute terms is greater. A $600,000 loan now costs $180 more per month than it did in January. A $750,000 mortgage adds $225.
The cumulative increase from the February and March hikes on a $600,000 mortgage will be around $180 per month. That is $2,160 a year.
— Sally Tindall, Canstar
These figures assume immediate pass-through from lenders. ANZ, Commonwealth Bank, Westpac, and NAB all announced they would pass on the full rate increase within 24 hours of the RBA announcement.
Rising Fuel Prices Add to Cost Pressures
Higher mortgage repayments coincide with a rise in fuel prices, which have increased since conflict in the Middle East began disrupting oil supplies. Petrol approached $2.30 per litre in late March, an increase of more than fifty cents since the disruption began.
According to analysis from AMP senior economist My Bui, the oil price increase adds an estimated $80 per month to the average household fuel bill.
Combining the mortgage and fuel increases, a household with a $500,000 loan faces approximately $240 more in monthly expenses compared to the start of 2026. For a $600,000 mortgage, the combined increase is approximately $260 per month.
Impact on Consumer Confidence and Spending
The ANZ-Roy Morgan Consumer Confidence Index dropped to its lowest reading since March 2020, when COVID-19 lockdowns began. The metric now sits lower than during the 2022-2023 rate hiking cycle.
Westpac analysis suggests underlying inflation reached 3.4% in the twelve months to January 2026, which is above the RBA's target band. Westpac projects headline inflation to reach 4.6% by June as the effects of higher fuel prices are registered in the economy.
Economic Outlook and Rate Forecasts
Economists at the four major banks expect a third consecutive rate hike in May. They cite persistent services inflation and the pass-through of energy costs into CPI data as reasons for the forecast. If a further 25 basis point increase occurs, a $500,000 mortgage could cost approximately $237 more per month by June than it did at the start of the year.
HSBC economist Paul Bloxham stated that Australia may require a recession to bring inflation under control.
Economic Context
The RBA targets an inflation rate of between 2% and 3%. Data shows underlying inflation at 3.4%. Petrol has risen more than fifty cents per litre in six months, and consumer confidence has fallen to its lowest level since March 2020. Australia's four largest banks forecast another rate hike in May.
The next RBA board meeting is scheduled for May 6, 2026.
SOURCES & CITATIONS
FREQUENTLY ASKED QUESTIONS
