There’s a 25% chance that the Reserve Bank will deliver a super-sized interest rate hike today, a Commonwealth Bank economist has warned.
Gareth Aird, CBA’s head of economics, said there’s a one-in-four chance RBA would decide to hike by a hefty 0.4%, taking the cash rate to 3.5% – a move that would see households with an average-sized home loan paying an extra $150 each month to service their mortgage.
In a market note, Aird said it was most likely that the central bank would lift the cash rate by 25 basis points to 3.35% but described a possible 40 basis point shift to 3.5% as “a non-trivial risk,” 9News reported.
RBA could then “keep the cash rate on hold over the period ahead while it assesses the impact of the cumulative rate increases.”
CBA is expecting interest rates to peak at 3.5%. Deutsche Bank economists, however, are predicting a 4.1% interest rate by August, with the hikes to occur in February, March, May, and August.
According to a Canstar analysis, borrowers are facing as many as six more interest rate hikes, with most experts expecting a ninth-straight hike this afternoon.
Rates were just 0.1% in May last year when the central bank started to raise rates in a bid to tame surging inflation, which hit a 32-year high of 7.8%, according to the latest December quarter inflation data.
A recent survey found that after eight consecutive hikes, one in five homeowners now admit to having borrowed too heavily on their mortgages.
Borrowers with a $500,000 home loan have seen their average monthly repayments soar nearly $1,000, up from $2,231 to $3,128.
And many homeowners are now struggling to deal with an annual rise in payments, which have jumped from $26,772 to $37,536 in just eight months.
Worsening the issue is the steadily increasing cost of energy, petrol, and food across 2022, 9News reported.
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