RBA keeps interest rates on hold as cost of living woes grow
Posted On April 5, 2022
The Reserve Bank of Australia (RBA) has kept interest rates at the historically-low level of 0.1 per cent, despite rising concerns around the soaring cost of living for ordinary Australians.
The central bank’s top economic minds today decided to reserve their right to increase rates, which have been at the current level since November 2020.
The RBA has long maintained that it would require inflation to be sustainably in the two to three-per-cent range before it would consider lifting rates.
“Housing prices have risen strongly over the past year, although some housing markets have eased recently,” RBA Governor Philip Lowe said in his monetary statement.
“With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers.”
Currently Australia’s headline inflation is 3.5 per cent – but Dr Lowe has previously said the bank was prepared to be patient in creating a move that would inevitably increase the pressure on households already burdened by mortgage stress.
Despite no change in this month’s meeting, many – including Australia’s biggest banks – have speculated that the RBA will hike up interest rates from as early as June 2022.
Almost all lenders now believe that 2022 will feature not one but multiple rate hikes, to lift Australia’s cash rate to around 1.5 per cent by the end of 2023.
Graham Cooke, head of consumer research at Finder, said banks are well aware of the forecasts and are moving early to cover their margins.
“That’s why banks have increased rates across over 400 fixed rate home loan products over the last week – some by up to 75 basis points,” Mr Cooke said.
“This indicates that they may be anticipating not one, but an avalanche of rate rises later in the year. The question is when, and that could be decided by international events.”
Finder analysis shows that a 75 basis point increase would cost the average borrower $3175 this year by raising repayments by $265 a month.
“Cash rate rises are like buses: they may take a while to come, then arrive one after another,” Cooke said.
“Banks have already jumped ahead of the RBA and it looks like the opportunity to lock in a long, low rate for your home may have passed.”
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