The Reserve Bank of Australia has opted to raise rates by 0.25 per cent at its November meeting as stubbornly high inflation continues to grip the economy.
The decision will pile on the pressure for mortgage holders who have a variable rate mortgage, with most banks expected to pass on the increases in full.
For someone who purchased recently in regional Australia, the changes could add an extra $76 to their mortgage, based on a loan size of $481,559. Monthly repayments would rise to $2,804.
Announcing the decision, RBA governor Philip Lowe said that high inflation figures continued to weigh on the economy.
"As is the case in most countries, inflation in Australia is too high," Mr Lowe said in a statement.
"Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role.
"Returning inflation to target requires a more sustainable balance between demand and supply."
He also warned that the latest rate rise, the seventh in as many months will not be the last.
"The Board expects to increase interest rates further over the period ahead," he said.
"It is closely monitoring the global economy, household spending and wage and price-setting behaviour.
"The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board's assessment of the outlook for inflation and the labour market."
The RBA announcement comes on the same day as new figures from CoreLogic that show Australian property values continue to decline.
Prices across Australia fell by 1.2 per cent in October and have fallen by 6 per cent since their peak in April, according to CoreLogic.
CoreLogic research director Tim Lawless told ACM this week that future rate hikes presented a major risk for property values.
"[It's our view] that we probably will see interest rates peaking out early next year, probably around the 3.35 per cent mark [for the RBA's cash rate], which is a little bit higher than what APRA has been testing borrowers at," he said.
"If we did see interest rates rising further than that, or we see inflation not slowing down, that double effect, that double whammy of both higher rates and high inflation, would start to stretch the balance sheets for households more thinly of course," he added.
Mr Lawless said a number of households would face a "refinancing cliff" in the first half of next year when it came time to refinance from their ultra low fixed rate loans, representing another major risk for house prices.
Each of the major banks is anticipating further rate hike announcements beyond today's RBA meeting.
On the low end of the scale, CBA is forecasting one further hike of 25 basis points at next month's meeting.
Westpac and NAB believe there will be three further hikes, ending in March 2023.
ANZ is tipping four hikes, with the RBA to hit the pause button in May 2023.
CBA is predicting that the cash rate will peak at 3.1 per cent; NAB is tipping a peak of 3.6 per cent; and ANZ and Westpac both believe rates will rise to 3.85 per cent.
