The Reserve Bank of Australia (RBA) lifts interest rates by 0.25 of a percentage point, taking the cash rate target to 3.1 per cent.
It was the bank's eighth straight rate rise since it started lifting the cash rate from a record low of 0.1 per cent in early May.
The cash rate is now at its highest level in a decade, since November 2012, when it was 3.25 per cent.
If passed on in full, the December rate increase will add around $75 to the monthly repayments of a household with a $500,000 mortgage debt on a 25-year term.
Westpac was the first of the major banks to announce a rise in its variable mortgage rates, by 0.25 of a percentage point, just in time for Christmas, from December 20.
NAB followed shortly after, with its 0.25-percentage-point increase taking effect from December 16.
'Recipe for an economic slowdown'
While some economists had been looking for hints that the Reserve Bank might be considering a pause in raising rates, or even that the cash rate might have peaked, the bank's governor Philip Lowe delivered an almost identical statement to last month.
"The board expects to increase interest rates further over the period ahead, but it is not on a pre-set course," he noted after the meeting.
"It is closely monitoring the global economy, household spending and wage and price-setting behaviour.
"The size and timing of future interest rate increases will continue to be determined by the incoming data and the board's assessment of the outlook for inflation and the labour market."
The Commonwealth Bank's head of Australian economics, Gareth Aird, was one of those looking for the RBA to weaken its stance on future interest rate rises.
"Given this change was not made we ... now see a peak of the cash rate of 3.35 per cent to be reached in February 2023," he noted.
"The risk sits with a peak in the cash rate of 3.6 per cent, although further tightening in 2023 is not 'locked in'. We continue to look for 50 basis points of rate cuts in the fourth quarter of 2023."
Indeed's Asia-Pacific economist, Callam Pickering, said Australia's economy remained robust for now, but was likely to slow down dramatically next year under the weight of interest rate rises.
"We expect domestic demand to soften in the first half of next year, driven by a slowdown in household spending," he noted.
"Australian households have been hit from every direction, with inflation-adjusted wages at an 11-year low, mortgage rates rising and asset prices falling. That's a recipe for an economic slowdown if ever I've seen one."
Home buyers braving a falling market
CoreLogic said that real estate transaction volumes are down 13.3 per cent on this time last year, with the monthly value of secured finance — mortgages — off nearly 18 per cent since rates started rising in May.
But not all prospective purchasers have been deterred, with Amanda Lowry and her partner Michael Evans moving into their first home together after years of living between their parents' houses to save for a deposit.
"We just want our own space, to be our own people, to live our life the way we want it," Ms Lowry said.
They bought a property for $680,000 after the jump in interest rates reduced their borrowing power but also saw home prices decline.
After nine consecutive months of rate hikes Ms Lowry is glad they did not spend more.
"It's been a bit volatile through this process," Ms Lowry said.
"I think when we first started looking, we were potentially looking at a 2 per cent interest rate and now we've ended up at a 5.2 per cent.
"It makes it very hard to budget and plan."
Ms Lowry said they have also budgeted for a "couple more rate hikes".
"We're comfortable at the interest rate currently," she said.
"So if it can settle at that rate and at least give us 12 months to settle in and find our feet, that would be great."
Mortgage borrowers are all but guaranteed at least one month of reprieve from further rate rises over summer, with the RBA board taking its traditional break from scheduled meetings in January.
Savers not seeing the full benefit of rising rates
Banks have been slow to pass on the full rate hikes to all savers according to those who monitor the products on offer.
"The reason the banks aren't fully passing on the increase is just to fatten up their margins," Canstar finance expert Steve Mickenbecker said.
"They've got the opportunity right now as rates are going up and they have lots and lots of deposits."
Mr Mickenbecker said while people willing to lock their money away in term deposits can earn interest rates of up to 5 per cent, people with basic savings accounts are losing out.
"The best base rate in the market at the moment is 3.5 per cent. The average is only 1.73 per cent — that's half of the best rate," he said.
"There is a great opportunity right now to shop around and look for a better rate."
Retirees are one of the groups that benefit most when savings account rates go up.
"But they're not the only ones — think first homebuyers who just want that little bit of help from the bank to get their deposit together, it matters for them," Mr Mickenbecker added.
Down at Sandy Bay Bowls Club in Hobart, retirees who rely on interest earnings from their savings are unimpressed.
"I don't think it's right. We're the ones that are helping the banks make big profits, so I think we should get more," Ann Whenn said.
"They're very good at putting up the mortgage rate, so they probably should do the savings rates at the same time," Margaret Fletcher added.
Rod Calnan said he, Ms Whenn and Ms Fletcher are also worried about younger people paying off mortgages.
"It seems a little unfair doesn't it."
