In this special announcement, brought to you by Legal Home Loans, find out if the Reserve Bank has lifted interest rates for the first time in more than two years.
At its December meeting, the board of the Reserve Bank of Australia held the cash rate at 3.6 per cent. Today, it has increased the cash rate by 25 basis points, to 3.85 per cent.
In a statement, the board said that while inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025. The board has been closely monitoring the economy and judges that some of the increase in inflation reflects greater capacity pressures. As a result, the board considers that inflation is likely to remain above target for some time.
“Capacity pressures reflect, in part, the greater momentum in demand seen in recent months. Growth in private demand has strengthened substantially more than expected, driven by both household spending and investment. Activity and prices in the housing market are also continuing to pick up. Financial conditions eased over 2025, and it is uncertain whether they remain restrictive. Credit is readily available to both households and businesses, and the effects of earlier interest rate reductions are yet to flow through fully to aggregate demand, prices and wages. More recently, the exchange rate, money market interest rates and government bond yields have risen following a rise in market expectations for the cash rate,” the board said.
“Various indicators suggest that labour market conditions remain a little tight and that they have stabilised in recent months, in line with the pick-up in momentum in economic activity. The unemployment rate has been a little lower than expected, and measures of labour underutilisation remain at low rates. Growth in the Wage Price Index has eased from its peak, but broader measures of wages growth continue to be strong, and growth in unit labour costs remains high.
“There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy is restrictive. On the domestic side, if growth in demand is stronger than expected, and growth in the economy’s supply capacity remains limited, it is likely to add further to capacity pressures. Uncertainty in the global economy remains significant, but so far there has been little or no depressing effect on the Australian economy; indeed, recent growth and trade in Australia’s major trading partners has surprised on the upside.”
In conversation with Lawyers Weekly, Legal Home Loans director of sales Cullen Haynes (pictured) said that today’s cash rate hike has not come as a surprise, given recent inflation data.
“We expect banks will pass on today’s increase to borrowers within the week. The current average interest rate range for residential loans we are seeing today is approximately between 5.1 per cent [and] 5.6 per cent, depending on the product and your borrowing profile,” he said.
“If you’re someone who is feeling concerned about rising mortgage repayments and the impact on your household budget, we recommend speaking to your bank or broker to explore the best structure suited to your needs. Doing so will not impact your credit history, and it is better to reach out early before falling into arrears.”
Property values have been rising at the fastest pace in more than two years, Haynes continued, and added that if lawyers are considering purchasing a property, now is a good time to get your pre-approval in place.
“Having pre-approval ready ensures you can move quickly when you find the right property,” he said.
“Legal professionals can access certain market advantages that can make entering the property market more attainable and realistic for the cohort. It’s best to speak to a specialist broker for lawyers to gauge what’s best for you.”
Jerome Doraisamy is the managing editor of professional services (including Lawyers Weekly, HR Leader, Accountants Daily, and Accounting Times). He is also the author of The Wellness Doctrines book series, an admitted solicitor in New South Wales, and a board director of the Minds Count Foundation.
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