In a statement, RBA governor Philip Lowe said that “inflation in Australia has passed its peak, but at 7 per cent is still too high, and it will be some time yet before it is back in the target range. Given the importance of returning inflation to target within a reasonable time frame, the board judged that a further increase in interest rates was warranted today”.

“The board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook. While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range; inflation is expected to be 4.5 per cent in 2023 and 3 per cent in mid-2025. Goods price inflation is clearly slowing due to a better balance of supply and demand following the resolution of the pandemic disruptions. But services price inflation is still very high and broadly based, and the experience overseas points to upside risks. Unit labour costs are also rising briskly, with productivity growth remaining subdued,” he said.

“The recent Australian data also confirmed that the labour market remains very tight, with the unemployment rate at a near 50-year low. Many firms continue to experience difficulty hiring workers, although there has been some easing in labour shortages and the number of vacancies has declined a little.”

“The board’s priority remains to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. Today’s further adjustment in interest rates will help in this regard,” Dr Lowe went on.

In conversation with Lawyers Weekly, Legal Home Loans general manager Aylin Unsal said that the broking firm expects that banks will pass on today’s (2 May) increase to borrowers within the week.

“The current average interest rate range for residential loans we are seeing is approximately between 5.2–5.5 per cent, depending on the product and your borrowing profile. Today’s increase will lead rates to rise by a further 0.25 per cent,” she said.

Mortgage holders locked into “historically low” fixed rates, Ms Unsal went on, should be aware that there will be a significant increase in repayments when their fixed term ends, which they may want to start budgeting ahead of time for.

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“Anyone concerned about rising mortgage repayments and [their] impact on household budgets should speak to their bank or broker about the best structure suited to their needs as soon as possible. We recommend doing this in the three months prior to your fixed term expiry,” she said.

“If you are feeling financially distressed, your lender may be able to provide options to assist. This could include moving to interest-only repayments for a temporary period. We recommend anyone in this situation to contact their bank directly.”

While the future can feel unknown, Ms Unsal concluded, lawyers should know that their advantaged position with lenders has not changed.

“Exclusive benefits, such as waived lenders mortgage insurance when buying with a deposit less than 20 per cent, are very much still available. If you do the due diligence of being prepared and have a good broker by your side, now is a great time to make a move,” she said.