The Australian dollar experienced a significant rise following the release of recent inflation data, which has raised concerns among mortgage holders.

In October, Australia’s inflation rate climbed to 3.8 percent compared to the previous year, marking a 16-month peak and exceeding financial market predictions.

After this data was unveiled, the Australian dollar increased to 64.81 US cents, compared to 64.58 US cents noted on Tuesday at 5 PM.

“This suggests that market sentiment is now factoring in a higher likelihood of an interest rate increase rather than a decrease,” remarked financial expert Nicole Pedersen-McKinnon.

The surge in living costs nearly eliminates the possibility of a near-term interest rate reduction and opens the door for the Reserve Bank to consider a rate hike.

“It’s unfortunate that prospects for further rate cuts are bleak, especially with the holiday season approaching,” Pedersen-McKinnon added.

‘At the beginning of the year, there were half a dozen rate cuts expected. We have had three of those and now it looks like we are going to get no more, or at least not any time soon.

‘We see these prices in the economy, once again, picking up steam, which is when the RBA chooses to slam on the brakes in the economy in the form of rate rises.’

Australia’s inflation rate surged to 3.8 per cent in October year-on-year,

Shortly after this report was published, the Australian dollar was buying 64.81 US cents, up from 64.58 US cents on Tuesday at 5pm.

‘This is devastating news for mortgage holders at the most expensive time of year, with no prospects for rate relief on the horizon anytime soon,’ she added.

But there is still hope for some Australians with a mortgage if they refinance their homes onto a lower rate with a different lender, Ms Pedersen-McKinnon, who is author of How to Get Mortgage-Free Like Me, told the Daily Mail.

The number of lenders offering at least one fixed rate under 5 per cent is starting to decline, Canstar rate tracking noted on Wednesday. 

The comparison website said there are currently 36 lenders offering at least one fixed rate below 5 per cent, a drop down from 46 a month ago.

Its research found that, if an average owner-occupier with a $600,000 loan and 25 years remaining, switched to the lowest two-year fixed rate instead of the lowest variable, they would pay an estimated $2,981 less in interest over two years, if rates stay on hold.

‘That would be the absolute best Christmas present you could give yourself,’ Ms Pedersen-McKinnon said of prospects for refinancing.

However, Canstar added that, if there are two more cash rate cuts, as Westpac has forecast for May and August next year, and the banks passed on both cuts in full to variable rates, the person who had fixed at 4.74 per cent would pay $1,072 more in interest charges than if they had stayed on variable.

People looking for the ‘right’ time to fix in order to pay as little interest to their bank will be doing so with a degree of uncertainty, the website noted, as the scenarios are estimates and do not include fees or out-of-cycle rate changes. 

Financial educator Nicole Pedersen-McKinnon (pictured) warned the inflation rise is bad news for those who were waiting for another interest rate cut before the end of the year

Ms Pedersen-McKinnon said many retirees will be hoping for interest rate rises.

‘This is great news for retirees because they will be able to potentially earn more on their money in the bank, which will help them alleviate the cost of living,’ she said.

Electricity was the biggest contributor to the jump in Australia’s consumer price index, up 37.1 per cent in the 12 months to October.

‘The annual rise in electricity costs is primarily related to state government electricity rebates being used up by households,’ the ABS said.

‘The timing of the rollout of the Commonwealth Energy Bill Relief Fund rebates also impacted electricity costs.’

The food and non-alcoholic beverages and recreation and culture categories both rose 3.2 per cent. 

The Treasurer acknowledged the inflation figure of 3.8 per cent, addressing concerns that energy subsidies were being phased out too soon.

‘They are a really important part of the budget but they are not a permanent part of the budget and we have made this clear,’ he told reporters in Canberra.

Electricity was the biggest contributor to the jump in Australia’s consumer price index. But Treasurer Jim Chalmers warned energy subsidies were not permanent in the federal budget

He said the government would wait for its mid-year budget update in December: ‘We’ll take a decision about electricity rebates in the context of finalising that mid-year update.’

The Australian Chamber of Commerce and Industry said today’s inflation figure of 3.8 per cent is uncomfortably high for households and businesses, which are hurting from increasing energy costs.

ACCI chief executive officer Andrew McKellar has said the end of state and territory energy rebates would impact inflation.

‘Electricity for example has gone up by 37 per cent in the twelve months to October,’ he said.

‘Those chickens were always going to come home to roost and we can’t expect rebates to continue indefinitely.

‘What we need is a clear plan to meet the short, medium and long term demands of households and businesses so that prices will eventually come down.’