On Tuesday the Reserve Bank of Australia's board decided to increase the cash rate target by a quarter of a per cent to 3.10%.
The last time the cash rate was this high was October 2012.
In his post-meeting statement, RBA Governor Dr Philip Lowe cited ongoing high inflation as a major reason for the increase.
This comes after there was some debate about if the RBA could hold the cash rate before Christmas.
PRD chief economist Dr Asti Mardiasmo said the 25 basis point rise acts as a middle-ground approach, given the RBA won't meet again until February.
"This is still on the trajectory to pull down inflation whilst paying close attention to household budgets and people's sentiment. In a way this is a 'keep the ship steady' approach over the break period," Dr Mardiasmo told Savings Media Group.
The RBA's latest move represents 300 basis points (3.00%) of tightening since May, and PropTrack senior economist Eleanor Creagh said this lowers home loan borrowing power by up to 20%.
"The fastest rise to the cash rate since the 1990s has quickly rebalanced the housing market from last year's extreme growth levels, with prices falling in most parts of the country," Ms Creagh said.
"However, if interest rates peak in 2023, price falls are likely to ease, with values stabilising as interest rate uncertainty reduces.
"The downward pressure from rate rises will be countered to a degree by positive demand effects that stem from tight rental markets and rental price pressures, rebounding foreign migration, stronger wages growth, and over the long run, housing supply pressures."
ABS data released Tuesday shows the total value of dwelling stock across Australia declined $358.9 billion to $9.67 trillion over the September 2022 quarter.
The average dwelling price fell by $36,800 to $889,800.
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