Comparison site Mozo and brokerage Home Loan Experts have joined the growing number of industry professionals who are now expecting the Reserve Bank to pull the trigger on another interest rate hike in November, off the back of the release of the latest Consumer Price Index (CPI) figures.
The CPI, which measures the average change in the prices paid by consumers for a basket of goods and services, rose 1.2% in the third quarter and a substantial 5.4% annually.
Jonathan Preston (pictured above left), homeloanexperts.com.au senior mortgage broker, said the higher-than-expected CPI print “definitely strengthens the chance of another hike,” suggesting that the odds of a rate hike is probably leaning to around 60/40.
Rachel Wastell (pictured above right), Mozo money expert, noted that all the big four banks are now anticipating an RBA rate hike next month, which may lead to a cash rate of 4.35%.
“The new RBA governor really is a Bullock in a china shop when it comes to knocking down inflation and has made it clear she'll do what's needed to keep us on that ‘narrow path’ to a soft landing,” Wastell said.
Wastell said a potential hike could result in an additional 25 basis points being added to variable rate home loans.
She said the consensus among major banks for a rate hike, backed by the markets, might lead to increased competition in the home loan market in the coming weeks and with CBA’s recent market share decline, there could be an introduction of additional incentives.
“The higher rates go, the more borrowers will be looking around for a better deal – that is, if they meet the serviceability buffer and can afford to switch, so banks will be doing what they can to attract new borrowers,” she said.
Preston also commented on the impact of a potential interest rate hike on the housing market, saying this could potentially lead to a “fairly substantial slowdown.”
“Consumer sentiment could drop if rates hike,” he said. “Clearance rates and asking prices could go lower with less appetite for transactions. Prices in Toronto, Canada, recently started to go down again after making a big recovery earlier this year, similar to Australia.”
Following the last rate hike in June, enquiries at homeloanexperts.com.au dropped and only started to rebound in August, indicating that consumer sentiment takes some time to recover after a rate increase.
Amid uncertainties, Preston said there may be opportunities for prospective buyers.
“Similar to the buying opportunities we saw last year, there could be another opportunity to pick up properties at discounts,” Preston said.
“We just have to ensure people feel confident enough to act. In 2022, people were holding off for lower rates and lower prices – and neither of those has happened.”
Meanwhile, Wastell said that with rates looking to rise for the 13th time since May last year, “if mortgage holders can get a better deal, now is the time to do so.”
According to data from Mozo, the big four banks currently offer variable rates averaging around 7%, while smaller lenders are providing variable rates starting at 5.
“As borrowers face thousands of dollars more in repayments every month in comparison to last year, it's never been a better time to compare home loans,” Wastell said.
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