Finder’s latest RBA survey showed that most analysts expect the Reserve Bank of Australia (RBA) to lift the official cash rate (OCR) by 0.25% to 2.85%.
According to Finder, this would lift average annual repayments on a $500,000 mortgage by nearly $10,000 from their level in April before the RBA’s first rate hike:
Finder warns “the predicted interest rate rise could spell disaster for millions of homeowners”, plunging many into severe financial stress and forcing a significant share of mortgage holders to sell their homes:
Almost three-quarters of Australians (70%) say they couldn’t afford their mortgage repayments if there was another rate hike before Christmas.
That’s the equivalent of 4.1 million households who would have to make changes to their finances with just one more rate rise.
Worryingly, 9% (roughly 500,000 people) say they’d have to sell their property if hit with another hike.
A further 3% admit they would default on their mortgage if their interest rate went up any higher.
Finder also believes “rapidly increasing interest rates will have dire consequences for Aussie households” and is “too much to manage for millions of households causing many to go to extreme lengths”.
Like it or not, the RBA looks to be following the Federal Reserve into interest rate Armageddon:
The key difference is that, unlike the United States, Australian households are carrying around double the level of household debt and the majority of our borrowers are on variable rates.
This makes Australian households far more sensitive to interest rate rises, and means that the RBA needs to be much more cautious hiking rates.
If the RBA is too aggressive, it will hammer household consumption (the economy’s key growth driver) and drive the economy into recession.
