Interest rates up another 50 basis points with more hikes to come
Interest rates up another 50 basis points with more hikes to come
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
As was expected, the Reserve Bank of Australia (RBA) raised interest rates by another 50 basis points this month.
The fourth rate hike in as many months, today’s decision takes the cash rate from an emergency low of 0.1% to 1.85%.
Since commencing the tightening cycle back on 5 May 2022, the cash rate has risen by 175 basis points; but despite the rapid hike, the cash rate remains well below the pre-COVID decade average of 2.56%.
The RBA is clearly prioritising fighting inflation over supporting the housing sector and any temporary slowdowns in overall economic activity, as the cash rate approaches a contractionary setting later this year.
If house prices fall and mortgage repayments rise, it might help to limit inflation through wealth effects and may also reduce household spending.
The Reserve Bank of Australia believes that inflation will be back at 2-3% by the end of the year and the cash rate may retreat somewhat through the second half of next year.
The cash rate is forecast to peak at 3.32% in March next year and fall back to 2.99% by the end of 2023.
Today’s rate hike, which is likely to flow through in its entirety to variable mortgage rates within a matter of days, paints a weaker picture for the housing sector.
More rate increases to come
Higher interest rates have already had an immediate downside impact on housing values, with CoreLogic’s combined capital cities index peaking shortly after the first-rate on hike in May.
Since that time, dwelling values across the combined capital cities index are down -2.8% to 1 August, after rising 25.5% through the recent upswing.
According to most bank forecasts, the cash rate could rise at least another 75 basis points before peaking.
With this in mind, the decline in housing values is expected to become steeper and geographically more widespread.
Sydney home values are already falling at the fastest pace since at least the early 1980s, with most of that decline (4.8%) occurring since May’s cash rate increase.
Home prices will be influenced by how quickly interest rates rise and how high they go, as well as the performance of the broader economy, available employment opportunities and demographic trends.
As the cash rate finds a ceiling, housing values should find a floor.
Published:Wednesday, 3rd Aug 2022 Author:
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the private lending sector, revealing significant inconsistencies and potential risks. This scrutiny comes in response to the sector's rapid expansion, with private credit extending approximately $200 billion in loans, primarily to high-risk real estate developers and property investors. - read more
The Australian Securities and Investments Commission (ASIC) has recently issued an interim stop order against City Finance Lending Pty Ltd, preventing the company from issuing its small amount credit contracts (SACCs) to retail clients. This action was taken due to deficiencies identified in the company's target market determination (TMD), raising concerns about the suitability of these products for consumers. - read more
The Australian Securities and Investments Commission (ASIC) has recently imposed significant penalties on Cigno Australia and BSF Solutions, along with their respective directors, for operating an illegal payday lending scheme. The Federal Court has ordered each company to pay $3 million, with additional fines of $500,000 levied against directors Mark Swanepoel and Brenton Harrison. This enforcement action underscores ASIC's commitment to protecting consumers from predatory lending practices. - read more
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you!
In today's financial climate, many Australians find themselves exploring options to manage and optimise their financial commitments. One option gaining popularity is loan refinancing. But what exactly is loan refinancing, and how can it benefit you, especially without negatively impacting your credit score? - read more
Welcome to our ultimate guide on maintaining a healthy credit score. Whether you're just starting your credit journey or you're an experienced borrower, understanding how to keep your score high is crucial. - read more
Getting a loan approved can be a critical step in achieving your financial goals, whether it's buying a home, starting a business, or consolidating debt. However, the loan approval process can often be complex and challenging, with many Australians facing difficulties in securing the loans they need. - read more
Need Help Finding a Loan?
Find out now if you qualify and compare
rates, offers and options from multiple lenders - without a credit check!
All finance quotes are provided free (via our secure server) and without obligation. We respect
your
privacy.
Knowledgebase
Debt Consolidation: A means empoyed to renegotiate debt. By combining loans and outstanding bills, a person can consolidate debt with a single financial institution resulting in a single monthly repayment.
No comments yet. Be the first to share your thoughts.