At its meeting today, the Reserve Bank of Australia decided to raise official interest rate by 25 basis points to 4.25 per cent, effective 7 April 2010.
The 25-basis point rise in interest rates, if passed on in full by the banks, will add about $50 a month to an average mortgage of $300,000.
The Commonwealth Bank of Australia was first of four big banks to act and has raised its standard variable rate 25 basis points to 7.11 per cent as other banks begin to review the rates on offer to borrowers and investors.
National Australia Bank, the fourth largest bank, yesterday reassured customers it would not move rates by more than the RBA's increases to the cash rate. So we can expect other big banks will follow the suit.
Today's rate rise was another step in the process of normalising the interest rate structure in Australia:
Interest rates to most borrowers nonetheless have been somewhat lower than average. The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today's decision is a further step in that process.