Household budgets are set to take another hit with the markets tipping the Reserve Bank of Australia will dish out another super-sized rate hike when it meets on Tuesday.
Of all the big four banks, all but the Commonwealth Bank of Australia are forecasting the central bank will raise the cash rate by half a percentage point for the fifth consecutive month to 2.85 per cent.
It means the average borrower would be paying $760 a month more than they were before hikes started in May, according to RateCity.
“While the RBA governor has indicated the board is looking to slow down the size of the hikes in coming months … October is unlikely to be the meeting it takes its foot off the accelerator,” research director Sally Tindall said.
With the cash rate predicted to rise as high as 3.60 per cent by February, borrowers have been encouraged to work out what their repayments would be at the predicted high.
“Borrowers should realise there’s a two-to-three month lag between when the RBA hikes the cash rate and when this extra money comes out of their bank account,” Ms Tindall said.
“If you can, start making these higher repayments now, so you know ahead of time you can afford them. If you can’t, start making cutbacks today.”
Graham Cooke, head of consumer research at Finder, said a sixth consecutive rate hike would pile even more pressure on homeowners.
“The current series of rate hikes has added almost $8000 to the annual cost of a $500,000 mortgage. Another 50 basis point hike will push that cost up to near $10,000,” he said.
“With one in four (26 per cent) Aussie homeowners already struggling to pay their mortgage in September, this could be the rate rise that pushes some borrowers to the limit.”
Minutes from last month’s meeting revealed the board debated whether to lift the cash rate by 0.25 per cent – a discussion not had in August.
The importance of returning inflation to target and “potential damage” from persistent inflation, paired with a relatively low cash rate, led to the 0.50 per cent increase.
However, the Greens have called for the RBA to hold off on lifting rates, warning it would only further fuel the risk of a recession.
“Smashing renters, mortgage holders, and small business owners while the global economy is teetering on the brink would be reckless,” treasury spokesman Nick McKim said.
The RBA’s decision comes just one day after news that property prices in the capital cities had fallen up to three per cent in past three months.
In September, properties were sold for 1.4 per cent less on average nationally than in August, according to CoreLogic data.
HOW MUCH EXTRA COULD YOU BE PAYING ON YOUR MORTGAGE?
- People with a loan size of $500,000 can on average expect to pay $148 extra if the RBA lifts rates by 0.5 per cent. That drops to $75 should the central bank opt for a 0.25 per cent hike;
- Repayments for a loan size of $750,000 could rise $222 or $110 respectfully; and
- People with $1 million loan can expect to pay an additional $229 or $147.
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