No more pain planned for owners

No more pain planned for owners

Experts predict more pain for mortgage holders when the Reserve Bank of Australia meets for the last time this year on Tuesday.

The council is generally expected to confirm an increase in the official interest rate by a quarter of a percent.

It would mean the eighth consecutive rate hike this year, with the official exchange rate currently standing at 2.85% on fears that inflation could peak at 8% by the end of the year.

Such rate increases have had a punitive effect on mortgage holders, with the rate hikes adding $1,618 to monthly minimum repayments on a $1 million mortgage since May.

Earlier in the week, RBA Governor Philip Lowe issued an apology to Australians who took out home loans based on his earlier assurances that rates would not rise until 2024.

Sally Tindall, research director at RateCity, said if the RBA was considering a pause, the most likely scenario would be a moderate increase.

“A quarter percent hike is the most likely outcome because we don’t have a meeting in January, so there will be a natural pause early next year when mortgage rates and mortgage repayments have some time to catch up,” Ms Tindall said.

“They just can’t take their foot off the accelerator all the way,” she said, adding that there was “a long way to go” to bring inflation down to between 2 and 3 percent.

Ms Tindall said that for an average borrower with a $500,000 mortgage, a quarter per cent increase would add $75 to their monthly repayments, but given the previous seven increases, the average borrower is paying $834 in more per month since the increases began. .

“That’s a lot of extra money to find in your monthly budget, especially when the cost of living continues to rise,” she said.

Ms Tindall said those who have scrambled to enter the property market will feel the heat the most, but said there was a dearth of data from banks on mortgage defaults.

“Flaws take a while to show up in the data,” she said, adding that people tend to cut other parts of their budget and prioritize refunds.

Ms Tindall also said the rate hikes had come ‘hard and fast’ and there was a two to three month lag in when they hit people’s repayments.

“We are unlikely to see an increase in defaults just yet,” she said.

Originally published as Interest rates are expected to rise further at the RBA meeting on Tuesday