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RBA all but confirms March rate rise as households struggle with record mortgage payments

The Reserve Bank has all but locked in a rate rise for next month as households continue to struggle with the cost of living.

Mortgage holders will soon be forking out a record high on repayments as the Reserve Bank of Australia all but locked in another interest rate rise for March.

The RBA on Tuesday released the minutes of its February meeting where it raised the official cash rate – which guides interest rates set by lenders – up 25 basis points to 3.35 per cent.

The minutes showed the central bank mulled over whether a 25 or 50 basis point rise was appropriate. In the end it opted for the former, stating there was “less need” for the latter given the previous nine consecutive hikes.

“The arguments … noted that inflation was expected to have reached its peak, that the outlook was for a softening in consumption growth and that there were many uncertainties around the outlook” the minutes said.

The case for the 50 basis point rise stemmed from concern high inflation would remain “persistent” and if so, “greater the risk of price and wage expectations moving higher”.

It’s a noticeable shift from when the board last met in December, when it entertained the idea of keeping the cash rate on hold.

The minutes noted the concern that households with variable rate loans would soon be hitting record highs but insisted savings acquired during the pandemic could hold them over.

“Interest rates on variable rate home loans had risen substantially over preceding months and required mortgage payments were projected to reach their highest level on record (as a share of household disposable income),” the minutes said.

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