‘Avalanche of rate hikes’ will cost borrowers more than $3,000 this year

Experts are now predicting not one, but an “avalanche of rate hikes” from the Reserve Bank of Australia that would cost the average borrower more than $3,000 this year.

Several major banks have forecast a rise in the official cash rate – which has remained at the historically low level of 0.1 percent – ​​since June this year.

All lenders now believe that 2022 will feature not one, but multiple rate hikes, to push Australia’s cash rate to around 1.5 per cent by the end of 2023.

Experts forecast an ‘avalanche’ of rate hikes this year. (APA)

Graham Cooke, head of consumer research at Finder, said banks know the forecasts all too well and are moving ahead to cover their margins.

“That’s why banks have raised rates on more than 400 fixed-rate home loan products over the last week, some by as much as 75 basis points,” Cooke said. “This indicates that they may be anticipating not one, but a spate of rate hikes later in the year. The question is when, and that could be decided by international events.”

The search engine’s analysis shows that a 75 basis point increase would cost the average borrower $3,175 this year by increasing payments by $265 per month.

“Interest rate increases are like buses: They can take a long time to come and then come one after another,” Cooke said.

“Banks have already gotten ahead of the RBA and it looks like the opportunity to lock in a long, low rate on your home may have passed.”

The average Australian borrower is looking to pay more than $3,000 in additional mortgage payments this year. (Sam Mooy)

Despite the gloomy outlook, Cooke said borrowers are always advised to keep in mind what other rates are available in the market.

Your home loan is likely to be your biggest expense, so be proactive to always get the best deal possible.

“The difference between three percent and two percent doesn’t sound like much, but it adds up to thousands of dollars a year when you refinance your mortgage,” he advised.

“Even if you need to terminate your fixed contract, you will likely save more than the cost of the termination fee.”

Australia’s major lenders have already hiked rates in anticipation of the RBA’s moves. (Attila Caesar)

AMP Capital Chief Economist Shane Oliver said the triggers for the RBA to raise interest rates were already in place.

“The RBA target of full employment has been reached, wage growth is picking up and inflation is well above target with a growing risk that inflation expectations start to rise in which case it will become self-sustaining, and the Budget will add more stimulus this year,” Oliver said.

“So the conditions for a rate hike will be ready by June.”

America’s most expensive property on the market for $215 million

Median property values ​​in Australia*

Capital city:

Change in 2022:

Median value:

sydney

+ 0.3 percent

$1,116,889

melbourne

+ 0.1 percent

$805,232

Brisbane

+ 6.4 percent

$749,293

adelaide

+ 5.7 percent

$602,717

Perth

+ 1.9 percent

$542,338

Hobart

+ 2.7 percent

$731,849

Darwin

+ 1.7 percent

$494,635

Canberra

+ 3.1 percent

$932,704

National

+ 2.4 percent

$738,975

*CoreLogic Hedonic Home Value Index. Results as of March 31, 2022

The information provided on this website is of a general nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, economic situation or needs. Before acting on any information on this website, you should consider the suitability of the information in light of your objectives, financial situation and needs.

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