Economic director David Koch says households are already under pressure from fuel and grocery costs beyond their control
Three cash rate increases in 2026 have left borrowers with little room to absorb further rises, according to price comparison website Compare the Market, which has called on the Reserve Bank of Australia (RBA) to hold rates at its August meeting.
David Koch (pictured top), economic director at Compare the Market, pointed out that cost pressures on households were being driven by factors outside their control rather than by consumer spending.
"Australian households are doing it tough," he said. "Yes, inflation is going up, but that's not because of consumers spending too much. It's things outside of their control like petrol prices going up because of the conflict in the Middle East.
"Essentially they're getting another rate hike when they go to fill up the car. Maybe Michele Bullock could have a word to the Treasurer instead and say, 'hey mate, will you cut spending and reduce demand and give us a bit of help with inflation that way?'"
The RBA lifted the cash rate by 25 basis points in February, March, and May before holding in June. The rate currently stands at 4.35%. On a typical loan of $735,000, a further 25-basis-point increase would add approximately $120 to monthly repayments.
| Loan size | Monthly impact of a 0.25% rate increase | Monthly impact of x2 0.25% rate increases (0.50%) | Monthly impact of x3 0.25% rate increases (0.75%) | Monthly impact of x4 0.25% rate increases (1%) |
|---|---|---|---|---|
| $500,000 | $81 | $164 | $247 | $331 |
| $600,000 | $98 | $196 | $296 | $397 |
| $750,000 | $122 | $246 | $370 | $496 |
| $900,000 | $146 | $295 | $444 | $596 |
| $1,000,000 | $163 | $327 | $494 | $662 |
| Source: Compare the Market. *Calculations assume an owner-occupied loan with a variable interest rate of 6.15% that is increased by 0.25% a month. It assumes a 30-year loan term, with no ongoing fees. This does not take into account the reduction of the loan balance over time. | ||||
Koch said he expects the RBA to hold at its August meeting but cautioned that borrowers should not assume the pressure has passed.
"Some economists still see another rate rise before the end of the year. But families are already being hit from all sides, and another hike would only add to the squeeze," Koch said. "Australians aren't driving inflation because they're splashing cash or living it up. Global fuel shocks and government spending are adding to demand, but mortgage holders are the ones being asked to cop the pain.
"Consumers have gone into the bunker. They're cutting back wherever they can, but many of the biggest cost increases hitting household budgets are completely beyond their control."
Koch advised homeowners to review their finances regularly and seek opportunities to reduce costs, noting this may become necessary should the RBA proceed with a further rate increase.
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