The Reserve Bank of Australia’s surprise decision to resume lifting interest rates – from 3.6% to 3.85% – means interest rates are at the highest level in 11 years.

Banks and other lenders are expected to lift mortgage rates as soon as possible.

Rates haven’t been at this level, or higher, since they were cut to 3.75% in May 2012.

Reserve Bank governor Philip Lowe said inflation, at 7%, was still too high and would take some time to come back down to the bank’s target range of 2-3%.

“The board’s priority remains to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy,” he said and ominously added, “Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted.”

The increase will add almost $100 a month to repayments on a $600,000 mortgage. The cumulative increase on repayments since the bank started lifting rates would then be more than $1,300 a month.

With this decision piling more pressure on those with mortgages, is there anything seniors can do to help those doing it tough?

We know from National Seniors Australia’s own research that older people are concerned about future generations, particularly their capacity to own their own home. One way older people can and are helping the younger generation is to help meet these costs, where they can.

Gifting limits set the rules on how much a pensioner can give away and not have this counted in their pension means test. These rules affect part-pensioners because of means testing. Those on the full pension will not be affected.

Gifting limits were set at $10,000 per year in 2002. Since then, the cost of living has risen dramatically.

While assets test thresholds are indexed in line with inflation each year (in July), gifting limits haven’t changed.

With many older people wanting to help the next generation to get ahead in life, these gifting limits seem unreasonable.

While nothing is stopping a part-pensioner from gifting more than the limit, it probably won’t make good financial sense because you are losing an asset that could return an income and would also be losing some of your pension payment because the money is still counted towards your pension means test.

At National Seniors, we believe pension gifting limits should be increased to allow older people to contribute to younger generations (if they want to) – especially those struggling as interest rates rise.

In our 2023 Budget submission, we recommended the gifting limits increase to reflect inflation and then be indexed annually. Based on average inflation over the past 20 years, the gifting limit in 2023 should have been more than $16,000.