Mortgage borrowers brace for more pain as RBA rate hike looms

Australian mortgage borrowers brace for household budget to get even tighter than anyone else interest rate hike looms this afternoon.

At present, Australia’s official target for the spot rate is 0.85 percent, after rising 50 basis points in June.

The Reserve Bank of Australia (RBA) is widely expected to raise interest rates by a similar amount at 2:30 p.m. in a bid to tackle rising inflation.

If the RBA raises the cash interest rate by another 50 basis points, the average owner-occupier with $500,000 in debt and 25 years on repayments will see a $137 increase.

Treasurer Jim Chalmers has warned that inflation will “get worse before it gets better” and that rate hikes are likely to become a “reality” in the coming months.

“Unfortunately, that’s the cruel reality,” he said.

“A lot of people I talk to in Australia are facing the same diabolical conditions, where prices for everything are going up, people’s wages are falling, it’s getting harder and harder for small businesses to operate.

He said Australia was in a ‘tough period’ with flooding disasters coupled with financial pressures.

“The government is doing what it can, but the only medium-term solution to this is to try to build a budget and economy that is as resilient as the Australian people themselves, and that’s what we’re working on.”

Shadow Treasurer Jim Chalmers.
Treasurer Jim Chalmers has warned of a “cruel” economic reality in the coming months. (Getty)

According to, the same borrower would already have endured a $333 per month increase from interest rates before May 2022.

“Australians may be staring down the course of the steepest RBA hikes since 1994,” said the site’s research director Sally Tindall.

Floating rate borrowers should prepare for another 0.50 percentage point hike this month and possibly another double hike in August.

“This would be a bold move by the Reserve Bank, but not against the measures taken by other central banks to curb inflation.

“Governor Lowe may have poured cold water on suggestions that the out-of-pocket rate could rise to 4 percent by Christmas, but the RBA will probably still be peeling the bandage soon.”

So how high can interest rates go?

According to Westpac’s latest forecast, the spot rate could rise to 2.35 percent by the end of 2022 and reach 2.60 percent by early next year.

If this forecast is realized, the same borrower used in the examples above could see their monthly repayments increase by $685 in less than 12 months.

Canstar financing expert Steve Mickenbecker said mortgage payment increases were just one factor squeezing every last dollar out of many household budgets.

After the first interest rate hike in May, house prices are already falling. (Flavio Brancaleone)

“Two in five Australians expect to have a bill or loan they can’t afford in the next six months,” Mickenbecker said.

“Most worrisome is that nearly half of those struggling to pay their bills will partially pay their bills or borrow from family and friends, showing that there is a high degree of desperation in people’s planning when it comes to meeting the costs of day-to-day living.

Hopefully, the one in five who plans to build up credit card debt will be able to recover when wage increases finally start to catch up, as the Reserve Bank expects.

“If the outlook for wage increases is too far off, the rise in the cost of living and loan repayments will reach crisis levels, especially for recent borrowers.”

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The RBA will announce its July monetary policy decision at 2:30 p.m. this afternoon. You can watch the decision as it comes live on and

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