The pain keeps coming as the Reserve Bank raises interest rates for the TENTH straight month: Here’s how much it will cost homeowners – as the astonishing toll hikes on the average family budget come to light
- The Reserve Bank of Australia raised the cash rate to 3.6 percent
- Tenth consecutive monthly increase since May 2022
- Warn of more rate hikes to curb inflation
- Wage-price spiral warning – at odds with treasurer
The Reserve Bank has hiked interest rates for the 10th consecutive month, pushing cash rates to an 11-year high of 3.6 percent — a warning of more hikes and a wage-price spiral.
A borrower with an average $600,000 mortgage will see their monthly payments increase by another $93 to $3,377, a 46 percent increase from the $2,306 level of early May 2022, when RBA rates were still at a record low of 0.1 percent.
Annual repayments are now $12,852 more expensive than just 10 months ago, with cash interest now at its highest level since early June 2012.
Governor Philip Lowe has strongly hinted that this latest rate hike would be far from the last with the 32-year high inflation rate of 7.8 percent, well above the Reserve Bank’s target of 2 to 3 percent.
“The board expects that further monetary policy tightening will be necessary to ensure that inflation returns to target and that this period of high inflation is only temporary,” he said.
“The board remains resolute in its determination to bring inflation back to target and will do whatever is necessary to achieve that.”
The Reserve Bank has raised interest rates for the 10th month in a row, pushing cash rates to an 11-year high of 3.6 percent
Wages rose 3.3 percent last year – the fastest rate in a decade – but most workers are suffering from a fall in real wages due to high inflation.
Dr. Lowe has warned of a wage-price spiral that puts him at odds with Treasurer Jim Chalmers, who will decide whether his seven-year term will expire in September.
“Wage growth continues to pick up in response to the tight labor market and higher inflation,” said Dr Lowe.
At an aggregate level, wage growth is still consistent with the inflation target and recent data suggest a lower risk of a price-wage chasing cycle.
“However, the board remains alert to the risk of a price-wage spiral, given the limited spare capacity in the economy and historically low unemployment.”
Governor Philip Lowe has strongly hinted that this latest rate hike would be far from the last, as the 32-year high inflation rate of 7.8 percent is well above the Reserve Bank’s target of 2 to 3 percent.
Unemployment rose slightly to 3.7 percent in January, compared to a 48-year low of 3.5 percent in December.
Westpac, ANZ and NAB expect the Reserve Bank to raise interest rates again in April and May, bringing the cash rate to 4.1 percent.
This would increase amortizations on an average $600,000 mortgage by another $283 to $3,567, with this increase based on the existing variable mortgage rate before the banks pass the final RBA increase.
The 3.5 percentage point rate hikes since May last year marked the most severe pace of monetary policy tightening since the Reserve Bank first issued a target rate for cash in 1990.
What the latest interest rate increase of 0.25 percentage point means for you
$500,000: $77 up to $2,814 from $2,737
$600,000: $93 up to $3,377 from $3,284
$700,000: $109 up to $3,940 from $3,831
$800,000: $124 up to $4,503 from $4,379
$900,000: $140 up to $5,066 from $4,926
$1,000,000: $155 up to $5,628 from $5,473
Monthly amortization increases based on a floating rate loan from the Commonwealth Bank increase by a quarter of a percentage point to 5.42 percent, up from 5.17 percent, to reflect the increase in Reserve Bank cash interest from 3.35 percent to 3.6 percent. Concerns a borrower with a 30-year loan.