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“Extending the pain”: Pressure continues to mount on household budgets Interest rate rise hits hard
lowest level in more than a decade and this housing shortage pressure is now flowing through to house prices. Rising rates are part of the problem.”
The Reserve Bank of Australia has delivered a crushing blow to mortgage holders –increasing interest rates for the 12th time since May last year.
The cash rate will increase 25 basis points to 4.10 per cent.
With increasing rates of mortgage stress and cost-of-living pressures, Tuesday’s decision will likely send many Penrith families to the brink.
Graham Cooke, Head of Consumer Research at Finder, said the decision came as a shock to many.
“Aussies with an average loan size of $577k will be spending over $15k more per year on their mortgage compared to what they were in April last year,” he said.
“That’s an additional $1,200 every month – a huge amount of extra money to be forking out on your mortgage.”
Ray White Chief Economist Nerida Conisbee said rate increases need to stop “if we want everyone to have a roof over their heads”.
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“As more countries head into recession, at this point, it does look like the RBA’s ‘narrow path’ will get us through while taming inflation. In the meantime however, it is creating a headache for renters, buyers and new housing supply that is going to take many years to resolve,” she said.
“And every interest rate rise is extending that pain. Rents are rising at their most rapid rate ever recorded, housing approvals are now at their
In his statement on Tuesday, RBA Governor Philip Lowe said lowering inflation remained the major target.
“Inflation in Australia has passed its peak, but at seven per cent is still too high and it will be some time yet before it is back in the target range,” he said.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.” The bad news is that it might not be the last increase this year.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” Lowe said.
“The Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
Conisbee said no matter what, housing costs are becoming unbearable for many.
“No property cycle is ever exactly the same and this time around, interest rate rises are making housing so much more expensive whether you want to buy, rent or build,” she said.