In a unanimous decision, the central bank's board lifted the cash rate to 4.6 per cent as it wrapped up its two-day meeting on Tuesday.
Expectations for a hike had firmed in the weeks leading up to the decision, with hotter-than-expected inflation, rising oil prices and hawkish commentary from the RBA's top brass.
Leading up to the decision, markets were fully priced in for another rate rise by February.
The pain for borrowers might not stop there, with markets placing an each-way bet for a third rate hike in 2027.
With the cash rate at 4.6 per cent, the average owner-occupier variable rate will rise to 6.49 per cent, according to financial comparison site Canstar.
Another two rate rises would mean monthly repayments on the average new owner-occupier home loan of $731,000 would be more than $650 higher than at the start of 2026.
Analysts will closely watch RBA governor Michele Bullock's post-meeting press conference for signs of where the bank might move next.
There were signs the jobs market was already softening in August, when the unemployment rate rose to 4.6 per cent.
HSBC chief economist Paul Bloxham sees falling house prices, slower consumer spending and weaker construction, exacerbated by higher interest rates, contributing to a rising risk that Australia's economy will tip into a recession in coming quarters.
If the economy deteriorates further, the RBA's resolve on getting inflation back to target might be tested.
Earlier on Tuesday, the Australian Bureau of Statistics revealed household spending growth was flat in August.
But consumers were still on a strong footing.
On an annual basis, household spending was up 6.8 per cent, which indicated that the economy was still exceeding its supply capacity and further interest rates were needed, said EY Oceania chief economist Cherelle Murphy.
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