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Despite 11 increases since last May, some forecasts predict more pain for mortgage borrowers today, with another 0.25 per cent hike on the cards.
The RBA paused interest rate rises in April but restarted the relentless hikes in its shock May decision to raise the cash rate by 25 basis points to 3.85 per cent.
The Australian economy continues to be plagued by stubbornly high inflation, a factor that may sway the RBA towards another cash rate increase.
About one in three economists are predicting another rate rise today.
National Australia Bank chief economist Alan Oster told Today this morning he thought the decision to lift rates was “line ball”, but he tipped the RBA to keep them on hold.
“Basically, we are starting to see signs that the Australian economy is slowing,” he said.
“I think it might be useful for the Reserve Bank to take some time and just assess so that you don’t essentially kill the economy trying to chase inflation. But ultimately I think the Reserve needs more to do.”
But Oster also warned further interest rates may be needed in coming months to tackle stubbornly high inflation, meaning more short-term pain for the Australian economy.
“We don’t expect to see much growth at all for the rest of the year. But in two years’ time we will have an inflation rate that’s back two to three, growth around 2 per cent.”
Another 0.25 per cent increase could see people with an average $600,000 mortgage paying up to $17,000 extra a year since the RBA began lifting interest rates last May.
Meanwhile, new data showed mortgage arrears are rising in Australia.
Credit agency S&P Global warned that the cost-of-living impact on household savings and tighter refinancing conditions are causing more borrowers to fall behind on their mortgage repayments.
“The cumulative effect of multiple interest rate rises is taking effect and borrowers’ savings buffers are eroding as the cost of living rises,” S&P said.
And it warned there may be tougher conditions later this year if the RBA continues to raise interest rates and banks cease cashback offers, further limiting competition.
S&P said this will mean “tougher” conditions and cause more arrears in coming months.
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