The Reserve Bank of Australia is expected to lift the cash rate today by another 0.25 percentage points, taking it to 3.10% – the highest rate in over a decade.
A further 0.25-percentage-point hike could mean that the average borrower with a $500,000 loan would be paying $834 a month more than before the hikes started in May, RateCity.com.au said.
But while all four big banks agree that the RBA would likely raise the cash rate by 0.25 percentage points at today’s meeting, the peak of the cash rate remains a contentious issue.
According to a RateCity.com.au analysis, if the cash rate gets to 3.85%, the average borrower with a $500,000 debt at the start of the hikes could see their monthly repayments increase to roughly $3,393 by May next year – a total $1,058 more a month, or 45%, since the start of rate hikes.
Someone with a $1 million debt at the start of the hikes would see their monthly repayments increase to $6,786 by May 2023, which would be a total rise of $3,175 from May 2022.
“For the first time in seven months, the board is likely to be mulling over the possibility of no hike to the cash rate – not something they have given any serious consideration to since April,” said Sally Tindall, RateCity.com.au research director. “While no change to the cash rate is a possibility, it’s still an unlikely choice for the RBA.
“The RBA is likely to take last week’s surprise inflation figures with a grain of salt,” she said. “It’s hard to see how one month’s worth of data would stop the cash rate hikes in their tracks entirely. Annual inflation might have dropped down to 6.9% but it’s still light years away from the RBA’s target band of 2%–3%. With unemployment at the lowest level in almost half a century, and a natural pause next month, the RBA won’t want to squander its last opportunity to hike rates this year.”
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