NAB has become the first bank to announce that it will increase its mortgage rates following the latest decision by the Reserve Bank.

On Tuesday, the RBA shocked markets with its announcement on Tuesday that it would raise the official cash rate by 25 basis points to 3.85 percent, the highest level in 11 years.

It followed a pause in April in its aggressive strategy of 10 consecutive rate hikes to offset inflation well above its 2-3 percent target.

NAB announced Wednesday afternoon that it would do the same, raising its standard interest rate on variable home loans by 0.25 percent per year, effective May 12.

The bank will also increase rates for the NAB Reward Saver, introductory NAB iSaver and standard variable rate savings products at the same time.

“The Reserve Bank’s decision to pause rates in April gave Australians a breather after 10 consecutive rate hikes,” said Rachel Slade, personal banking executive at NAB group.

“With the cash rate rising again, there may be some customers concerned about their financial situation, and we’re here to help.”

NAB Assist is available for financially concerned customers to discuss options, which may include pausing or reducing payments.

Reserve Bank Governor Philip Lowe said the increase was necessary to return inflation to the 2-3 percent target range, which he listed as the RBA’s “priority.”

While inflation slowed slightly in the March quarter, Australia’s Consumer Price Index held at an “uncomfortably high” 7 percent.

“Inflation in Australia has passed its peak, but 7 per cent is still too high and it will be some time before it returns to the target range,” Dr Lowe said in his monthly statement.

“Given the importance of returning inflation to target within a reasonable amount of time, the board felt that a further increase in interest rates was warranted today.”

Other factors leading to Tuesday’s interest rate hike included high service inflation and Australia’s tight labor market, with labor costs rising despite productivity growth.

New fear after rate hike

Dr. Lowe also warned that “further tightening” might be needed, signaling future pain for households already struggling with rising cost-of-living pressures.

Treasurer Jim Chalmers says the RBA’s surprise decision to raise rates will be difficult for Australians, but he will not be drawn into calls by the Greens for the government to rescind the latest hike.

Greens leader Adam Bandt said on Wednesday the government had an opportunity to make things easier for Australians already suffering the impact of 11 raises since last May.

While conceding that Tuesday’s decision, which took the market by surprise, was a “quite forceful, quite brutal” reminder of a slowing economy, Dr Chalmers said he would not interfere with the independent process.

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