More than 800,000 Australian households will be facing further financial pressure as many shift to more expensive variable rates in 2023, the Reserve Bank forecasts.
Speaking at the senate select committee on the cost of living on Wednesday, RBA head of economic analysis department Marion Kohler said the bank estimated about $350bn worth of loans would shift from off fixed to variable rates this year.
Ms Kohler said while she was unable to supply an accurate number of households impacted by the shift, she was able to provide the committee on Wednesday a “very rough” estimate based on the “back of an envelope” calculation.
She estimated the RBA hiked rates, which spiked from 0.1 per cent in April to 3.1 per cent by December, would see the number of loan facilities rolling off fixed rates this year “in the high 800,000s”.
“There are people who have more than one loan facility,” Ms Kohler said.
“ You might have loans with different banks or a split with variable rate loans.”
Finder CEO Chris Ellis said the latest survey from the Australian financial comparison website found 60,000 households have seen mortgage repayments at the variable rate increase by $10,000 a year since the eight latest RBA statements were released last year.
“One in five mortgage holders feel they’ve borrowed too much, with (mainly) younger Australians feeling this way,” he told the committee on Wednesday.
“When asked one-third surveyred, or about 34 per cent, struggle to pay their home loan and 13 per cent have missed a mortgage repayment.”
The Reserve Bank Board will next be meeting on February 7 to discuss its monetary policy decision, with its public statement being released on February 10.
It’s expected the bank will hike rates from 3.1 per cent to 3.35 per cent.
Prime Minister Anthony Albanese told reporters in Perth he was conscious of the impact a rate rise would have on households.
“We know people are under real pressure when it comes to cost of living,” he said before rattling off various policies he says will ease the burden.
“(Inflation) is something the whole world is grappling with and it is something that the government is very conscious of and we will be conscious of in the lead up to the budget as well.”
Pressed further, Mr Albanese responded he had “faith in the RBA and its processes, which are at arms length from government”.
Ms Kohler told the committee she was unable to share the immediate outlook of the country but it’s not all bad news for Australians.
“What we can say is that we think the peak in inflation was at the end of 2022 – at around 8 per cent – and that inflation will begin to ease over the course of this year.”
Ms Kohler said when inflation is “too high”, high interest rates are needed to “balance to help” the return of stability.
“We are aware this is making it difficult for a number households but the judgment is (that having) the higher inflation for longer is inflicting even more pain,” she said.
“We understand that some people are finding the rise in interest rates difficult to manage and others will have to cut back on discretionary spending.
“However, higher interest rates are necessary to ensure that the current period of higher inflation and cost of living pressures does not persist too long.
“As the Governor has emphasised, the Reserve Bank Board is focused on returning inflation to target and establishing a more sustainable balance of demand and supply in the Australian economy.”
Ms Kohler said she wasn’t able to confirm the forecast due in 10 days but stood by the RBA’s November statement that the country would not be heading for recession, unlike other countries facing that prospect.
“The governor has said the aim of the board is to have a narrow path and the aim is to bring inflation down but we do take account of the economy,” she said.
“In the November (statement) entailed that it did not detail a recession.
“Bringing inflation down for everyone is really the board’s focus and that will help everyone as well.”
More to come.
Denial of responsibility! galaxyconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.