But this increase in interest rates will be temporary.
As Adrian Orr (Reserve Bank Governor) said at the announcement …
Once the economy is more balanced and inflation comes down, “the official cash rate can return to a lower, more neutral level.”
We see that both in the Reserve Bank’s forecasts and Tony’s modelling.
What does it mean for you?
There is a real risk that some borrowers will see higher interest rates coming and rush to lock in a long-term rate (e.g. 5 years), thinking it will be cheaper.
But since rates will rise and then fall again, there is a sizeable risk that today’s 5-year rate will look expensive in 3 years' time.