While millions were looking for a winner at the Melbourne Cup the Reserve Bank has resumed hiking its cash rate by increasing it by 0.25 percentage points resulting in a cash rate of 4.35% and being at its highest level in 12 years.
New governor Michele Bullock has lately sent repeated signals the RRBA were poised to resume rate rises if inflation didn’t slow as expected. The RBA remains ready to hoist interest rates again if required, she said in an accompanying statement.
“Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago,” Bullock said. The central bank had received fresh data since its August meeting and “the weight of this information suggests that the risk of inflation remaining higher for longer has increased”.
“CPI inflation is now expected to be around 3.5% by the end of 2024 and at the top of the target range of 2% to 3% by the end of 2025. The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.” Bullock said.
Prior to the RBA’s announcement, economists at each of the big four banks had already tipped a cash rate hike on the back of last month’s surprise inflation read.
Many in the finance industry are concerned about the impact of another rate rise on borrowers, as 12 rate rises in 18 months have already pushed many to the brink and depleted their savings.
Now that another rate hike has occurred, another $101 will be heaped onto monthly repayments for a $600,000 loan or $168 per month for a $1 million loan.
FBAA managing director Peter White AM expressed deep concern, especially in light of comments from the Salvation Army about a “direct correlation” between interest rate rises and suicide.
Speaking to the Daily Telegraph, a Salvation Army spokesperson said, “we could triple the volume of our call centre staff for our crisis assistance lines, and the phone would keep ringing”.
While the rate hike would likely put increased pressure on borrowers, the decision came as “no surprise at all”, according to Tim Ash, CEO and founder of investment group Property Investors.
“It is one of only a few mechanisms the Reserve Bank has to place pressure on inflation,” Ash said. “With high immigration, consumer purchasing power, and governments spending at state and federal levels, I was not surprised to get a rise before the festive season shopping and new year.”
“Cost of goods for most business have risen with prices being passed on and with demand ahead of supply especially in the property market what other options does the RBA have? More media fear?”
While the decision to raise rates will inevitably change the economic and borrowing landscape, it’s impact on borrowers themselves is yet to be seen.
The impact of the cash rate increase on borrowers will vary depending on their individual circumstances. This with variable rate loans will see their repayments increase immediately and those with fixed rate loans will not see their repayments increase until their fixed rate period expires.
This will mean less first home buyers now with the fear of further rate hikes, and investors having to put in place rental price increase to cover interest costs.
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With Banks quick to pass on interest rate rises and slow to negotiate competitive rates with their existing clients, now is the ideal time to book in a call with John Marzin our Principal Finance Broker here https://calendly.com/john-marzin/loan-specialist-discovery-call
Otherwise reach out on 1300 300 013 or see our webpage HERE.
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If your loan is NOT currently fixed, ‘Do you know your interest rate?
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Yes? You need to call for a rate review to plan in advance for your next loan.
With so much finance and property doom and gloom media hype at the moment, let us put a smile on your face by reviewing your current finance products to see how we could help reduce your mortgage repayments.
— November 2023 RBA Update —
The Rates That Stopped A Nation!
The 13th consecutive increase in interest rates by the Reserve Bank of Australia is really going to sting many mortgage holders!
The cash rate increased another 0.25% this month to 4.35% and is the highest level in 12 years.
Look out new mortgage repayments! Time To Refinance!
Read the full statement from the RBA here.