Major blow for millions of Aussies with a mortgage as RBA leaves rates on hold - here's why there could be even more pain on the way

The Reserve Bank has left interest rates on hold but hinted more pain is possible for struggling home borrowers hoping for some relief soon. 

Governor Michele Bullock's monetary policy board said inflation was taking too long to moderate - with new forecasts showing price pressures will remain elevated into 2025.

'Recent information indicates that inflation continues to moderate, but is declining more slowly than expected,' the Reserve Bank said on Tuesday afternoon.

The RBA also suggested another rate rise was still possible despite borrowers already coping with the most severe pace of monetary policy tightening since 1989.

'The board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks,' it said.

'The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the board is not ruling anything in or out.'

The Reserve Bank cash rate is already at a 12-year high of 4.35 per cent and borrowers are paying 68 per cent more a month they did two years ago - following 13 interest rate rises in 18 months.

But the RBA has updated its forecasts, predicting inflation will remain above its two to three per cent target into late 2025.

A new statement on monetary policy, also released on Tuesday, forecast headline inflation would only moderate to 3.2 per cent by June 2025 - down from 3.6 per cent in the March quarter of 2024.

Annual underlying measures of inflation, stripping out major price movements, were above the 4 per cent level in the March quarter.

This has seen the futures market rule out the prospect of a rate cut in 2024, and predict relief being postponed into the second half of 2025.

The RBA's updated forecasts also had the trimmed mean measure of inflation falling to 3.1 per cent by June 2025 - down from 4 per cent in the March this year. 

The Reserve Bank, however, is still expecting both headline and underlying inflation to drop to 2.8 per cent by December 2025. 

Unemployment was only forecast to rise to 4.3 per cent by June 2025 - up from 3.8 per cent in March - adding to fears of wages potentially adding to inflation. 

Treasurer Jim Chalmers issued a statement on Tuesday afternoon stating the next meeting in June would be almost eight months since the last RBA hike in November 2023.

'Today's decision by the independent Reserve Bank means by the time the board next meets we will be approaching eight months since interest rates went up,' he said.

'This period of rates on hold has provided stability in difficult times for Australian mortgage holders and small businesses.'

Dr Chalmers promised to ease inflationary pressures in the upcoming May 14 Budget. 

'Our main focus in the near term remains easing inflation and helping relieve cost-of-living pressures,' he said.

The May Budget will be carefully calibrated to the economic circumstances, striking the right balance between getting inflation under control, easing cost-of-living pressures, supporting sustainable growth and building fiscal buffers in an uncertain global environment.'

A borrower with an average, $600,000 mortgage has, since May 2022, seen their monthly mortgage repayments surge by 67.7 per cent to $3,868 - up from $2,306. 

That means annual repayments are now $18,744 higher than they were two years ago, based on a Commonwealth Bank variable rate climbing to 6.69 per cent - up from 2.29 per cent for those with a 20 per cent mortgage deposit.

Australian mortgage holders have been hit with the most aggressive rate hikes since 1989, sparking a cost of living crisis for the nation's 3.8million households servicing a mortgage.