Your mortgage payments are about to go up AGAIN: RBA hikes interest rates for the seventh month in a row
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One thing that we can all agree on is that there is an abundance of uncertainty in our economy these days. Whether it is a stark economic slowdown, an impending currency war, or a downturn in housing affordability, there doesn’t seem to be a clear path forward for Australians. Between battling high living costs and rising debt levels, making ends meet can be a daily struggle.
As a result, the Reserve Bank of Australia has raised interest rates for yet another consecutive month, with warnings that they now anticipate inflation to peak at a higher-than-expected 8% by the end of 2022.
It was a 0.25% increase that totalled a 2.85% cash rate. This was the second time in 12 years that the RBA has moved rates on Melbourne Cup day, similar to the 2010 development right before the French horse Americain won the race.
Previously, the cash rate was 4.75%. After the interest rate increase today, an average Australian with a $500,000 mortgage is expected to pay around $74 more each month after having a total increase of $760 in monthly repayments since interest rates began to increase in May 2022.
In comparison, borrowers with larger loans (permanent establishment in Australia) that surpass the $1,000,000 threshold are now dealing with monthly repayments that are over $1,500 greater than they used to be.
According to the latest consumer price index report, current inflation levels in Australia are currently sitting at 7.3 per cent, with the expectation of an increasing rate in the upcoming months.
The RBA Governor Philip Lowe stated that an increase in interest rates was an important step in stabilising the economy.
'The Board has increased interest rates materially since May. This has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target,' he said.
'The Board expects to increase interest rates further over the period ahead. 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.'
As usual, this increase came with eagerness.
Mr Lowe added: 'The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.'
'The Board looks through temporary effects on inflation and focuses on the medium-term inflation outlook. It judges that inflation will be returning to target over the next year.'
For the majority of Australians, who have significantly more debt than they did three years ago, the interest rate increases will be a double-edged sword.
Higher interest rates will make borrowing money more expensive, but they will also stabilise the currency and increase the cost of imports, which will reduce inflation and lower living expenses.
While it might lower inflation and benefit people on fixed incomes, borrowing money will be more challenging.
And things are about to get worse for those already struggling under mortgage stress...
The cash rate may rise to 3.85 per cent before levelling out, according to economists at Westpac and ANZ.
Additionally, RateCity.com.au, a personal finance and mortgage comparison website, claimed that the same borrower with a $500,000 loan could experience a spike in monthly payments of about $1100 in just 12 months.
RateCity.com.au Research Director Sally Tindall said, 'Australians are already facing the highest annual rise in the cost of goods since 1990. Throw in skyrocketing mortgage costs and it's a double whammy for families struggling to make ends meet.'
'While some families are doing it tough, many households still have a significant savings buffer at the ready for a rainy day, with the latest APRA data recording yet another increase in household deposits to a record $1.32 trillion.'
'Households should remember that while we're six rate hikes in, many of them have only started paying the third or fourth hike.'
What do you think of the most recent interest rate increase, members? Do you think there’s more to come or has the interest rate 'peaked' for the time being? Better yet, how are you and your loved ones coping with the rising cost of living? Share your insights with us in the comments below.
For further interest rate increase discussion, you may watch the video below:
Credit: YouTube/The Economist
As a result, the Reserve Bank of Australia has raised interest rates for yet another consecutive month, with warnings that they now anticipate inflation to peak at a higher-than-expected 8% by the end of 2022.
It was a 0.25% increase that totalled a 2.85% cash rate. This was the second time in 12 years that the RBA has moved rates on Melbourne Cup day, similar to the 2010 development right before the French horse Americain won the race.
Previously, the cash rate was 4.75%. After the interest rate increase today, an average Australian with a $500,000 mortgage is expected to pay around $74 more each month after having a total increase of $760 in monthly repayments since interest rates began to increase in May 2022.
In comparison, borrowers with larger loans (permanent establishment in Australia) that surpass the $1,000,000 threshold are now dealing with monthly repayments that are over $1,500 greater than they used to be.
The impact of the rate hike on mortgage payments. Credit: Nine/Rate City.
According to the latest consumer price index report, current inflation levels in Australia are currently sitting at 7.3 per cent, with the expectation of an increasing rate in the upcoming months.
The RBA Governor Philip Lowe stated that an increase in interest rates was an important step in stabilising the economy.
'The Board has increased interest rates materially since May. This has been necessary to establish a more sustainable balance of demand and supply in the Australian economy to help return inflation to target,' he said.
'The Board expects to increase interest rates further over the period ahead. 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.'
As usual, this increase came with eagerness.
Mr Lowe added: 'The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.'
'The Board looks through temporary effects on inflation and focuses on the medium-term inflation outlook. It judges that inflation will be returning to target over the next year.'
Governor of the Reserve Bank Philip Lowe stated that the goal of the central bank is to stop chronically rising inflation. Credit: Louise Kennerley.
For the majority of Australians, who have significantly more debt than they did three years ago, the interest rate increases will be a double-edged sword.
Higher interest rates will make borrowing money more expensive, but they will also stabilise the currency and increase the cost of imports, which will reduce inflation and lower living expenses.
While it might lower inflation and benefit people on fixed incomes, borrowing money will be more challenging.
And things are about to get worse for those already struggling under mortgage stress...
The cash rate may rise to 3.85 per cent before levelling out, according to economists at Westpac and ANZ.
Additionally, RateCity.com.au, a personal finance and mortgage comparison website, claimed that the same borrower with a $500,000 loan could experience a spike in monthly payments of about $1100 in just 12 months.
RateCity.com.au Research Director Sally Tindall said, 'Australians are already facing the highest annual rise in the cost of goods since 1990. Throw in skyrocketing mortgage costs and it's a double whammy for families struggling to make ends meet.'
'While some families are doing it tough, many households still have a significant savings buffer at the ready for a rainy day, with the latest APRA data recording yet another increase in household deposits to a record $1.32 trillion.'
'Households should remember that while we're six rate hikes in, many of them have only started paying the third or fourth hike.'
What do you think of the most recent interest rate increase, members? Do you think there’s more to come or has the interest rate 'peaked' for the time being? Better yet, how are you and your loved ones coping with the rising cost of living? Share your insights with us in the comments below.
For further interest rate increase discussion, you may watch the video below:
Credit: YouTube/The Economist
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