It’s another big hit for borrowers, who can expect to pay almost $300 a month extra on a $1 million mortgage.
Since the RBA started lifting rates from their record low of 0.1 percent, borrowers are now paying over $1,200 a month extra on that same $1 million mortgage. Ouch.
It’s the fifth month in a row the official cash rate has been hiked and governor Philip Lowe says he expects more are on the way.
After spending many months trying to lift the stubbornly low inflation rate to its target range of 2-3 per cent, the central bank now finds itself doing everything it can to rein in the suddenly runaway cost of living index.
“The board expects to increase interest rates further over the months ahead, but it is not on a pre-set path,” RBA governor Philip Lowe said in the September post-meeting statement.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market.”
Mr Lowe pointed to several competing influences on its official cash rate, with many borrowers yet to feel the effects of recent rate rises yet amid falling consumer demand and rising costs of living.
On the plus side, many households were able to build up financial buffer room during COVID, unemployment is low and pay rises are starting to kick in.
Counteracting some of that however are the global pressures of the Ukraine war and COVID lockdowns still going on in China.
“The path to achieving this balance is a narrow one and clouded in uncertainty, not least because of global developments,” governor Lowe said.
To get a gauge on how homeowners are being affected by the hikes, financial comparison service Canstar found a big split between those that were suffering and those that were unaffected so far when it asked 2,600 people.
The results of that survey showed around a quarter of them were having to cut back spending to cope with the aggressive rate hikes, while 44 per cent said they would be unaffected.
Interestingly, around 15 per cent said they would actually benefit, through higher returns on their savings and/or falling house prices.
UBS economist George Tharenou told the ABC he thinks governor Lowe’s statement indicates the rate rises might start slowing down from this point on.
“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.
There are more than a fair share of economists right now however who believe interest rates won’t peak until there’s a ‘3’ in front of them.