Australians could face four interest rate hikes by the end of the year

Australians could be hit by FOUR interest rate hikes by the end of the year as bankers fear rising inflation and overheating from the Covid recovery – adding $400 a month to mortgages

  • Australians with mortgages could see four interest rate hikes in 2022
  • Some experts predict the first rise in a decade will occur as early as May
  • Westpac thinks the cash rate will hit 1.75% by March 2024
  • This hike would add more than $400 per month to a $500,000 mortgage










Economists, including a former Reserve Bank board member, have warned Australians could face four interest rate hikes by the end of this year.

A faster-than-expected economic recovery and fears of rising inflation could lead Australia’s central bank to raise interest rates more than once, with most experts expecting the first hike to come in August or September.

Other economists believed the RBA was being “complacent” on rising inflation and that those with mortgages would face higher repayments as early as May.

It would be the first increase in a decade, with the cash rate at an all-time low of 0.1%.

Economist John Edwards, a former RBA board member, said the bank should act on “changing” economic data and raise the rate by August.

“There is no point in just one increase, it will be slow and gradual,” he told the Wall Street Journal.

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Some economists predict the RBA will introduce the first interest rate hike in more than a decade as early as May, with three more hikes through 2022

Reserve Bank Governor Philip Lowe told the National Press Club last week that it was a “plausible scenario” that interest rates would rise this year

Reserve Bank Governor Philip Lowe told the National Press Club last week that it was a “plausible scenario” that interest rates would rise this year

Mr Edwards predicts interest rates will hit around 1% by the end of the year, although other futures market analysts think they could be closer to 1.23% by the end of the year December.

“I would expect the RBA to now think that a hike in May was perhaps too early to start tightening in small steps in the short term, but by August on the current economic trajectory it will have started to move,” Edwards said.

One of Australia’s largest banks, Westpac, forecasts a 0.15% rise in the exchange rate in August, followed by another 0.25% rise in October. It forecasts the cash rate to reach 1.75% by March 2024.

An increase in the current cash rate from 0.1% to 1.75% would add $427 per month to the costs of someone paying off a $500,000 mortgage.

Reserve Bank Governor Philip Lowe told the National Press Club last week that it was a “plausible scenario” for the cash rate to rise this year, based on a revised inflation forecast for reach 3.25% by June.

The bank also predicted that economic growth in 2021 would reach 5%, down from the 3% it had previously forecast, and that Australia’s economy would expand by 4.5% this year.

Combined with an expected post-Covid drop in unemployment and expected wage growth of around 3% this year, the RBA has been cautious about a sharp rise in inflation.

“As the board has previously said, it will not raise the cash rate until actual inflation is sustainably within the 2-3% target range,” the central bank said in a statement.

Futures market analysts estimate Australia's cash rate could be 1.23% by December, while Westpac predicts it will be 1.75% by March 2024

Futures market analysts estimate Australia’s cash rate could be 1.23% by December, while Westpac predicts it will be 1.75% by March 2024

RBA worries about jump in inflation caused by faster-than-expected economic growth, lower unemployment and higher wages in 2022

RBA worries about jump in inflation caused by faster-than-expected economic growth, lower unemployment and higher wages in 2022

Another of Australia’s big four banks, NAB, on Tuesday predicted Australian house prices would fall by around 10% in 2023 due to the threat of higher interest rates.

He said the housing market, which has seen the fastest annual growth since 1989, would likely start to turn the page next year.

“With our view on upcoming rate hikes, we now expect the turning point in house prices to occur in the second half of 2022,” the bank’s quarterly real estate survey predicted. .

NAB said it expected house prices in Melbourne and Sydney to fall 11.4% – prices in Brisbane would drop 6.4%.

“We expect this pattern to be evident in capital cities, although larger declines are occurring in Sydney and Melbourne, while Brisbane and Adelaide are seeing smaller declines,” the bank said.

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