RBA Governor Philip Lowe said inflation of 6.9 per cent in the year to October was still too high and that further increases in inflation were expected until the end of the year.

“The board expects to increase interest rates further over the period ahead, but it is not in a pre-set course,” Lowe said.

“The size and timing of future interest rates will continue to be determined by the incoming data and the board’s assessment of the outlook for inflation and the labour market.”

The latest hike to a cash rate of 3.1 per cent follows a slight fall in inflation in October. However, economists did not expect that would be enough to deter the RBA from lifting interest rates.

The cash rate is now at its highest since 2012.

Canstar’s Effie Zahos said the repayments on a $500,000 loan had increased by $890 this year. Repayments on a $750,000 loan were up by $1333.

Canstar also has worked out that if the RBA hikes the cash rate to 3.85 per cent, as the ANZ and Westpac predict, the monthly repayment on a $500,000 loan would be $3144. On a $700,000 loan the repayment would be $4401.

However, relief is eventually expected to arrive for homeowners, with the next rate cut forecast for late 2023 or early 2024, according to RateCity.

Variable rates were likely to be priced above 5 per cent after the latest hike, presenting a huge shock for the thousands of borrowers who come off their fixed rate loan in the next 12 months.

There is one early reprieve for homeowners. The RBA board doesn’t meet in January so there won’t be any movement until February.

Some of the major banks were also anticipating rate reductions next year as inflation falls steeply. The Commonwealth Bank has said today’s increase would be the last by the RBA and cuts would occur by November next year, but it has changed its mind and now expects another rise in February. Westpac and ANZ expect interest rate increases until May and then cuts in December.

“If inflation levels continue to decrease into 2023, it’s likely that the RBA will pause its harsh cash rate hikes, or even move to cut the cash rate again,” RateCity said.

“Without a crystal ball it’s hard to definitively say how the next two years will look for home loan interest rates. These forecasts are subject to change at any time, as dictated by these international and domestic factors.

IFM economist Alex Joiner said said the RBA suggested household spending “is expected to slow over the period ahead” which he said was “a seeming intensification around pressures on the sector.

“The RBA seems much more concerned about domestic pressures on the economy than its peer central banks, with its continued language around keep the economy on an even keel and “achieving a soft landing” via a “narrow path”,” Joiner said.