Australia Braces for Highest Interest Rates in Over a Decade
The Reserve Bank of Australia (RBA) is expected to raise interest rates at its September meeting, which would be the highest since 2011. All four major banks in Australia are predicting a rate hike, with some even forecasting further increases by November.
According to Canstar data insights director Sally Tindall, if the cash rate rises to 4.60%, it will take us back to 2011 levels, but we'll be carrying more than double the debt we had then. The total value of residential mortgages has risen by 138% since 2011, with surging property prices being the main reason.
A 0.25 percentage point increase would add $91 to the monthly repayments for a borrower with a $600,000 loan and 25 years remaining at the start of this year's hikes. This is on top of previous rate rises that have already added an extra $364 a month to some borrowers' payments.
Industry experts are also predicting that further rate rises will lead to greater falls in housing prices. Housing Industry Australia chief economist Tim Reardon said, 'Home prices are falling, that is a symptom of the previous rate increases that will, with time, flow through to reduced inflationary pressures.'