Reserve Bank tipped to deliver Christmas pain to home owners

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The Reserve Bank of Australia is expected to inflict more pain on mortgage holders with another interest rate rise … but a pause has not been ruled out.

The RBA has been lifting interest rates since May to tackle rising inflation, with another 25 basis point rise to take the cash rate to 3.1 per cent.

Economists from all four of the big banks expect another cash rate rise when the board meets on Tuesday.

While the central bank is widely tipped to hike the cash rate, Governor Philip Lowe has left his options open ahead of its December board meeting.

St George economist Besa Deda said a rate hike was not a done deal, with senior RBA officials repeatedly pointing to how long it takes interest rate hikes to ripple through the economy.

Ms Deda said a pause was possible on Tuesday, with early signs of a spending slowdown and easing inflation in recent data drops.

On the flip side the unemployment rate remains at record low levels, and the central bank misses a chance to shift rates next month as it does not meet in January.

But if the bank does deliver another 25 basis point rise, mortgage holders with variable rate loans will endure another uplift in their monthly repayments.

Numbers crunched by RateCity show repayments increasing by $1,251 since May for the average $750,000 loan with 25 years remaining.

RateCity research director Sally Tindall said people should prepare for rates to rise further next year.

“If you can’t afford these higher repayments, put your budget under the microscope to see where you can make cutbacks,” she said.

-AAP

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