Lucky for some: Mortgage holders have fingers crossed against 13th straight rate rise
Borrowers will be hoping for interest rate relief before a neck-and-neck call between another cash rate boost or staying on hold.
The Reserve Bank board, due to meet on Tuesday afternoon for the July decision, is nearing the end of its hiking cycle after lifting interest rates 12 times since May last year.
Number 13, if delivered, will take the official cash rate to 4.35 per cent.
Already, 28 per cent, or 1.43 million mortgage holders were at risk of mortgage stress, according to Roy Morgan.
“The number of Australians at risk of mortgage stress has increased by 627,000 over the last year as the RBA increased interest rates at 12 of the last 13 meetings,” Roy Morgan said.
The level is the highest in 15 years. The peak was during the global financial crisis in 2008 when it reached 35 per cent.
“The number if mortgage holders considered extremely at risk has now increased to 922,000 in the three months to May, which is significantly above the long term average over the past 15 years of 15.9 per cent,” Roy Morgan said.
The RBA’s hikes were in response to high inflation and interest rates were the only tool at its disposal to slow the economy and weigh down consumer prices.
The increases have been hard-felt by mortgage holders, especially those who borrowed to capacity during the most recent pandemic-fuelled housing boom.
Higher interest rates push up mortgage repayments on variable-rate loans, with another 25 basis point hike to add $1211 to monthly payments on a standard $500,000 loan compared to before the hikes, according to RateCity.
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Both markets and economists are unclear on the trajectory for interest rates, with 27 economists surveyed by Bloomberg divided on the July decision – 14 expected a pause and 13 tipped a hike.
A major slackening in the rate of headline inflation is playing into the case for a pause, with the monthly consumer price index falling from 6.8 per cent to 5.6 per cent in May.
But under the hood, the outlook for inflation was less optimistic, with the weakening much less pronounced when big falls in fuel and travel were plucked out.
The RBA has also ingested fairly robust spending data since the last meeting, although a rush to snap up discounted goods in part explained the jump in that number, as well as signs of strength in the labour market.
On the other hand, business surveys have pointed to sinking confidence and worsening conditions, which point to a cooling economy and interest rates starting to bite.
