The Reserve Bank of Australia (RBA) left the cash rate on hold this month, after lifting it by 0.25% in November. Since May 2022, the cash rate has increased by 4.25%, from 0.10% to 4.35%.This has had a knock-on effect on variable home loan interest rates, which look set to remain high for months to come. Several of the big banks already lifted their home loan rates on top of the November cash rate hike it's understandable that homeowners are anxious about their home loan repayments. We've outlined everything you need to know about the latest RBA cash rate decision and what it means for your mortgage in the guide below.

The RBA controls the national interest rate (also known as the cash rate) to ensure we have a stable currency and to avoid high inflation which generally drives up living costs.The RBA examines the growth of the Australian economy and decides whether to slow it down by raising the cash rate or speed it up by lowering the cash rate.Several factors influence the rise and fall of interest rates, including:Employment and wages growth - If employment levels are low, the RBA will be more inclined to lower the cash rate as a means of stimulating investment and creating more jobs. Similarly, slow wages growth can indicate slow economic growth and make it more likely that the RBA will keep the cash rate where it is.Inflation - One of the RBA’s ongoing goals is to keep the inflation rate between the 2 and 3 per cent target range. If the rate of actual inflation exceeds 3%, the RBA is inclined to increase interest rates to help consumers retain their level of buying power. The current quarterly rate of inflation is 4.1%, and it appears to be on the way down.Growth of the Australian economy - GDP represents the value of all goods and services produced in Australia. If it falls too low, the RBA may lower the official cash rate target to help stimulate the economy (if interest rates are lower, more people will buy houses, open businesses, make investments, etc.)

The official cash rate affects how expensive it is for banks and other financial institutions to borrow money from one another in the overnight money markets.This exchange of short term ‘overnight funds’ is how lenders ensure they can meet their liquidity needs each day.Simply, if it's more expensive for lenders to borrow money, they can pass this expense on to consumers by increasing the interest rates on their products (such as home loans).