While the Reserve Bank of Australia (RBA) interest rate pause began at the beginning of this month, it might be too soon for mortgage holders to find comfort in this temporary relief.
Despite the RBA leaving interest rates on hold at 4.1 per cent in an attempt to bring down inflation to its targetted 3 per cent, experts are saying the pause is just “not enough” to alleviate the impact of the next interest rate hike.
Speaking to 9News, managing director of the Finance Brokers Association of Australia (FBAA) Peter White, says “the RBA must take responsibility for their poor insight and management that has led to the current issues facing those across Australia who are paying off a home loan and renting.”
“The Government must also act to monitor banks, some of which are exploiting the interest rate rises to maximise profits, indicating that they learnt nothing from the Royal Commission,” White added.
“Many mortgage holders are finding it difficult to refinance. Other vulnerable borrowers are being lured by banks into what they believe is a better interest rate deal, only to find that their rate and payments increase once they are deemed an ‘existing’ borrower’.”
New research from Roy Morgan has also found that an estimated 1.43 million mortgage holders are “at risk” of “mortgage stress” because of the recent interest rate increases. It’s the highest number of “at risk” mortgage holders the country has seen since the 2008 Global Financial Crisis.
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RBA Governor Philip Lowe has also warned Australians to expect more hikes in the coming months, saying that it would be needed to bring inflation.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” Lowe said in a statement.
“The decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy and the economic outlook and associated risks.
“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the forecasts for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
Head of consumer research at Finder, Graham Cooke, has described the RBA’s decision as a genuine toss up.
“The latest inflation figures made a strong case for the RBA to pause its series of rate hikes,” Cooke said.
“However, the RBA repeatedly states that its intention is to get inflation all the way to the target rate of 2-3 per cent and we aren’t there yet.
“While homeowners have been given a break this month, they should buckle up for further hikes this year.”