Did you think the interest rate hikes were over? Australia’s Big Four banks say homeowners can expect another rate hike this afternoon. This is how much it will cost YOU
Australia’s Big Four banks are all predicting a rate hike on Melbourne Cup Day in a bid to curb persistently high inflation.
Bad news for borrowers on Tuesday would mark the 13th rate hike in 18 months and send the Reserve Bank’s interest rate soaring to a 12-year high of 4.35 percent.
This would increase mortgage payments on an average $600,000 mortgage by another $99 per month.
Many had thought this rate hike cycle was over, but the Commonwealth Bank, ANZ and Westpac changed their minds after official consumer price index figures released last month showed inflation at 5.4 percent.
That is still well above the Reserve Bank’s target of 2 to 3 percent and was little changed from the 6 percent level in June, despite the steepest pace of monetary policy tightening since 1989.
Australia’s Big Four banks are all predicting a rate hike on Melbourne Cup Day, with inflation still on the high side (pictured is Commonwealth Bank CEO Matt Comyn)
High gasoline prices and domestic services inflation are clearly a concern for new RBA Governor Michele Bullock, who said last month that rate hikes remained on the table because of inflation.
“While we have not raised rates since our last rate hike in June, we have made it very clear that we may have to go again,” she said at a Senate hearing.
While major banks, including NAB, are universally expecting a rate hike on Tuesday, the futures market indicates traders are split 50:50 on whether they will rise or stay the same.
And a survey of 45 economists by the financial comparison group Finder found that fourteen of them predicted no change to the current rate of 4.1 percent.
But for two-thirds (31) of them, interest rates rose to 4.35 percent on Tuesday, which would be the highest level since December 2011.
Experts expecting no change included Stephen Koukoulas, chief economist at Market Economics and previously a senior adviser to former Labor Prime Minister Julia Gillard.
But most of the people on the Finder list predicting no rate hike on Tuesday are mainly university academics rather than economists from a major bank or financial services company.
The minutes of the RBA’s October meeting, Bullock’s first as governor, suggested there would be a ‘low tolerance’ if inflation stayed higher for longer, arguing that consumers would continue to spend in the short term if they expected prices to continue rising.
“In reaching their decision, members noted that further policy tightening may be necessary if inflation proves to be more persistent than expected,” the report said.
“The board has a low tolerance for a slower return of inflation to target than currently expected.”
The Reserve Bank does not expect inflation to fall back to the top of the 3 percent target range until June 2025, as it moderates from a 32-year high of 7.8 percent reached in June last year.
High petrol prices and domestic services inflation are clearly a concern for new RBA Governor Michele Bullock, who has stated she would not hesitate to raise rates again if inflation shows signs of staying higher for longer.
The Commonwealth Bank, ANZ (chief executive Shayne Elliott, pictured) and Westpac have changed their minds after official consumer price index data, released less than a fortnight ago, showed inflation rose 5.4 per cent in the year to September.
Another quarter of a percentage point increase in interest rates on Tuesday would mean a borrower with an average $600,000 mortgage would have to find an extra $99 a month to meet their repayments.
A standard Commonwealth Bank variable rate, for a borrower with a 20 per cent mortgage deposit, would rise from 6.44 per cent to 6.69 per cent.
The new monthly repayment of $3,868 would be 67.7 percent higher than the $2,306 level of May 2022, when the RBA cash rate was still at a record low of 0.1 percent and banks were offering interest rates starting at a ‘two’.
Those expecting no change included Stephen Koukoulas, the chief economist at Market Economics, who was previously a senior adviser to former Labor Prime Minister Julia Gillard.