It promised to be big – and the Reserve Bank delivered today with another whopping interest rates rise of 0.5 per cent.
That meant another $216 a month on an average mortgage of $750,000 or $922 since the RBA went on the rampage raising rates in May, according to RateCity.
These are the biggest increases in 28 years and represent a rise a month over five months.
But it isn’t over.
RBA governor Philip Lowe said “The board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.”
But the worst is yet to come on two fronts – new rises AND the full effects of the last increases.
According to the Commonwealth Bank’s head of Australian economics Gareth Aird most variable mortgage customers have yet to feel the real pain, with minimum repayments adjusted to reflect the first two rate rises only.
Mr Lowe said there had been a slump in confidence and spending – warning signs the economy may slow.
A survey of more than 2,600 people by financial comparison service Canstar found a quarter of people said they might have to cut back their spending, but 44 per cent said they would make no change.
The only bright spot was a NAB economist claiming RBA may now make lower rate rises.
The ABC quoted UBS economist George Tharenou saying: “We still expect the RBA to slow down the pace of rate hikes to 25 basis points [0.25 of a percentage point] per meeting, and peak at 2.85 per cent in November 2022,” he said, but added that, “risks remain to the upside”.
Aussie Home Loans said 86% of Australians have not taken action since the first RBA decision, unaware of how to avoid the anxiety bubble growing in the form of mortgage stress.
New research has revealed a significant number of Australian mortgage holders
are waiting, watching and hurtling towards mortgage anxiety – with 30% admitting the
troubling truth that avoiding a default on their home loan is now a major consideration.
Worryingly, almost three in ten Australian mortgage holders (28%) did not consider that the
cash rate would increase at all when budgeting for a home loan, despite having to account for
it in their home loan assessments, while another four in ten (38%) only budgeted for the
impact of a cash rate of 3% or under.