Mortgage payers have been warned against complacency, despite expected welcome news around Tuesday’s all-important cash rate announcement.
Economists and experts have tipped that the Reserve Bank of Australia (RBA) will hold the cash rate on Tuesday, but borrowers have been advised to prepare for potential future hikes, as the board is unlikely to rule out future increases.
Forecasts and Expectations:
- Current Cash Rate: The cash rate target is 4.35 percent, a 12-year high, aimed at pushing inflation into the target range of 2-3 percent by mid-2026.
- Economists’ Predictions: Gareth Aird, Head of Australian Economics at Commonwealth Bank, anticipates that the RBA will leave the rate unchanged, but will maintain a cautious stance on future movements.
Recent Economic Data:
- Consumer Price Index (CPI): The June quarterly CPI rose from 3.6 percent to 3.8 percent, aligning with the RBA’s forecasts but still above the target range.
- Trimmed Mean CPI: This measure of underlying inflation fell slightly from 4 percent to 3.9 percent, indicating some moderation in core inflation pressures.
Statements and Implications:
- RBA’s Stance: The RBA governor Michele Bullock is expected to reiterate the board’s vigilance regarding inflation risks and the uncertain economic outlook.
- Impact of Federal Rebate: The federal government’s $300 energy rebate might lead to a downward revision of headline inflation figures in the RBA’s August Statement of Monetary Policy.
Advice for Borrowers:
- Prepare for Potential Hikes: RateCity urges borrowers to brace for possible future rate increases, emphasizing that the inflation outlook will influence the RBA’s decisions.
- Cost of Rate Hikes: A 25 basis point increase in the cash rate would result in an additional $75 in monthly repayments for a $500,000 mortgage, totaling $1,285 in increased payments since May 2022. For a $750,000 mortgage, the monthly increase would be $112, amounting to $1,928 in total additional payments.
Political Reactions:
- Treasurer Jim Chalmers: Chalmers has refrained from making predictions, acknowledging persistent cost-of-living pressures despite encouraging inflation figures.
- Shadow Treasurer Angus Taylor: Taylor criticizes the government for contributing to inflation through increased spending, claiming Australia lags behind other G10 countries in tackling inflation.
For personalized mortgage advice and to navigate the changing interest rate landscape, contact BOA & Co. today. Our team of experts is here to help you make informed decisions and secure the best mortgage options for your situation. Call us at 1300 952 286, email info@boanco.com.au, or visit our website at www.boanco.com.au.