This article is from the Australian Property Journal archive
ALL eyes were on the Melbourne Cup and the Reserve Bank of Australia yesterday, which raised the cash rate a further 0.25% basis points to 2.85% after much conjecture leading up to the meeting that rates would rise once more.
Now compared to 7 months ago in April, Aussies are expected to pay an extra $815 a month on a $500,000+ mortgage.
Its tough news for home owners already struggling with the cost of living says head of consumer research at Finder Graham Cooke.
“This seventh consecutive rate hike – 275 basis points in total – will be a bitter pill to swallow for many.”
“The current series of rate hikes has added almost $10,000 to the annual cost of a $500K mortgage,” he said.
The rate of which these hikes have occurred have just about matched the pace of the rate hikes from 1994, albeit those were slightly faster.
Head of investment strategy and chief economist at AMP, Shane Oliver anticipates the RBA hikes to peak soon.
“We see the RBA remaining in the slow lane and raising rates again by another 0.25% next month taking the cash rate to 3.1% which we expect to be the peak for this cycle as next year is likely to see a sharp slowing in growth and a significant fall in inflation.”
“By late next year or early 2024 we expect the RBA to start cutting rates. We would concede though that the risk to rates remains on the upside in the near term.”
Inflation has caused a series of issues for Australians financially and it’s not set to stop here either with Cooke stating it will most likely get worse. 62% of experts surveyed believe that inflation will increase by at least 7.5% at the end of 2022.
“According to the experts, the factors causing these price increases are likely to hang around for many months, meaning no relief on the horizon for households.”
The RBA is expecting inflation to slow however, from “around 8%” by the end of the year to 4.75% by the end of 2023 and slightly above 3% by end-2024.
NAB was the first major bank to respond to the rate hike, passing the increase in full, effective from 11 November 2022.
In October, NAB increased savings products by 0.25% and the iSaver intro rate by 0.70%, while Term Deposit rates increased by up to 1.50%.
NAB group executive for personal banking Rachel Slade offered NAB’s support to struggling customers.
“For those who are finding the increasing interest rates a challenge, banks have a critical role to provide support.
“At NAB, we have dedicated financial counsellors who listen to each customer’s individual situation and are able to offer tailored solutions – whether that be a reduced payment arrangement, payment break or restructuring their loan.”
In more financial torment for everyday Australians, the costs of petrol will continue to rise with the average price set to stay between the $2.02 and $2.18 marks after an average of $1.82 in October.
28% of Australians responded to a survey that petrol prices are one of the most stressful day-to-day expenses. This follows housing and groceries as the top two most stressful expenses for Australians. The burden of energy costs doesn’t appear to be lightening soon either, as a result of Russia’s invasion of the Ukraine.
“There is now evidence that price increases that emerged on the spot market have now spread to the whole term structure of futures energy prices,” UNSW’s Nalini Prasad said.
“This indicates that energy costs will remain high in 2023,” said Prasad.
Mark Crosby from Monash University predicted prior to the RBA announcement,
“Rates are still below neutral, though the key consideration in the next 6 months will be whether energy prices in particular stabilise or continue to rise.”
