The RBA one again hikes cash rate 50 basis points from 1.85% to 2.35%.
The Reserve Bank of Australia has, once again, lifted the official cash rate by 50-basis points, as it aims to bring monetary conditions back to an healthy equilibrium.
This fifth consecutive hike marks a total rise of 225- basis points since May. With the new cash rate sitting at 2.35%, it is now at the highest level since 2015. However even the interest rate on exchange settlements has also been hit with a 50-basis point hike to 2.25%
The recent increase shows the relentless determination of the central bank to battle inflation, at one stage reaching 6.1% in June of 2022.
As inflation currently sits at the highest level since the good old 90’s, experts such as Governor Philip Lowe says it is expected to increase further over the next few months. The recent announcement took place on Tuesday.
Lowe went on to explain that “Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy,”
Govenor philip lowe- RBA
The RBA’s central forecast is for inflation to hit 7.75% over the course of this year, taking a slight decline to just above 4% in 2023. Albeit a deviation from its August statement, when the RBA said it expected inflation to be around 1.75% in each of the following two years, the RBA is now forecasting inflation to be around 3% in 2024.
With the unemployment rate declined further in July, to 3.4%, the lowest in 50 years, Lowe said the Australian economy continues to grow solidly. The way Aussie households will be spending was a continued source of uncertainty, he said. Consumer confidence had said to have fallen and housing prices were in slumping in most markets, after earlier larger increases.
The RBA believes that higher inflation and interest rates are putting significant pressure on household budgets, with the full effects of higher interest rates yet to be felt in mortgage payments.
How can this affect you?
Due to mounting affordability stress, many homeowners may put previously planned renovation plans on hold, and first home buyers may find it harder to enter the property market.
Naturally, lenders pass on the increase to the wholesale cash rate to their customers on variable home loan rates, which may cause some customers to seek out lenders offering lower interest rates, or loans with different features better suited to their needs.
Unsure if you’re getting the best deal on your home loan?
As rates are expected to increase over the next coming months it’s a smart idea to give your mortgage a health check to ensure you’re getting the sharpest rates on your loan.
If you’re struggling to meet your repayments or looking for a sharper rate on your home loan, get in touch with our team of expert brokers and financial advisors who can help you save thousands in the long run and guide you through the refinancing process.
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