Homeowners could find themselves paying hundreds extra, experts say
Homeowners will have to continue living under the stress of surging interest rates as the Reserve Bank of Australia (RBA) continues its efforts to curb inflation.
Expert predictions warn mortgage owners that they could end up paying hundreds of dollars more by Christmas, according a news.com.au report.
Craig James, chief economist for CommSec, said the RBA will likely increase the cash rate by 25 basis points in August, September, and November, raising the rate to 2.1%, from 1.35%, by the end of the year.
“We can expect further interest rate hikes in the coming months. This is the most aggressive the Reserve Bank has ever been – we’ve had three interest rate hikes in a row and the last two were 50 basis,” said James. “At 2.1%, the Reserve Bank would basically stop there for a while and see what impact that has on the economy.”
These predictions would cause homeowners with the average mortgage of $615,000 to spend an extra $991 on their repayments between July and December, if they have a 30-year loan. This, according to news.com.au, is based on the average variable rate of 3.93%.
Predictions from the Australian Securities Exchange (ASX) were even more dire, suggesting the cash rate would reach 3.5% by May of the following year. In this scenario, the average mortgage owner would have to pay more than $5,000 in repayments for a single year, said the news.com.au report.
Such dire predictions seem unlikely, however, considering how a rate increase to 3.5% would likely cause the property market to tip over the edge.
“If that were to occur, combined with the increase to the cost-of-living, I think it would push the economy into recession,” Shane Oliver, ANZ Capital chief economist, told news.com.au.
