INDUSTRY NEWSNationalReal Estate News

Interest rates tipped to hold this month but experts warn hikes may not be over

Real estate and economic experts have tipped the RBA to keep the cash rate on hold at Tuesdayโ€™s board meeting, according to the latest Finder survey.

Each of the 38 experts in the Finder RBA Cash Rate survey said the central bank, led by new Governor Michele Bullock, would keep interest rates at 4.1 per cent.

If this occurs, it will be the fourth consecutive month the RBA hit pause on rates, after 12 hikes since May last year.

Finder Head of Consumer Research Graham Cooke said it was the first time this year that every expert in the survey had predicted a hold.

โ€œAussies are being hit with price increases almost everywhere โ€“ and we have seen a sharp rise in stress caused by housing, energy, petrol and grocery bills,โ€ he said.

โ€œAnother rate hold will be welcome news to the many homeowners who are already at the end of their tether.

โ€œOur data shows that many households are at breaking point โ€“ 36 per cent of mortgage holders struggled to pay their home loan in September.

โ€œDespite the RBAโ€™s prudent pause in interest rates since July, inflationary pressures are persisting.โ€

Laing+Simmons Chief Executive Officer Leanne Pilkington said recent speculation had focused on when the RBA would cut rates instead of hiking them again.ย 

โ€œInflation is the variable to watch and as evidenced in the latest CPI data, the upward pressure applied by high petrol prices is concerning for mortgage holders,โ€ Ms Pilkington said.

โ€œStill, we believe a hold pattern for at least the next few months is the most appropriate course of action.โ€

But not all experts agree on where the rates endpoint will be, with 42 per cent of the view that the rate will peak at either 4.35 per cent or 4.6 per cent.

Peter Boehm, of Pathfinder Consulting, predicted the RBA would keep rates on hold this month but potentially increase next time.

“I believe the new Reserve Bank governor, despite underlying inflation ticking up, will want more time to assess whether this new uptick reflects a new trajectory, or is a blip,โ€ he said.

โ€œIf underlying inflation holds at this level for another month, the chances of a rate increase in November are almost certain.”

Mala Raghavan, from the University of Tasmania, tipped the RBA would maintain the cash rate this month, but said there were numerous factors to consider from November onwards.

โ€œIn August, the inflation rate surged to 5.2 per cent, surpassing July’s 4.9 per cent and persisting at approximately 5 per cent since May,โ€ she said.

โ€œThis sustained high inflation rate is a cause for concern, given that it significantly exceeds the RBA’s target range of 2 to 3 per cent. 

โ€œA closer analysis of the CPI data provided by the ABS reveals troubling trends. 

โ€œNotably, substantial increases in automotive fuel prices are poised to have a considerable ripple effect on transport costs and subsequently impact various sectors of the economy.โ€

Ms Raghavan said the cost of essential household items such as bread, dairy, rent, electricity, and gas continued to rise and these factors collectively contributed to an elevated cost of living index.

โ€œIf the inflation rate remains stubbornly around the 5 per cent mark in the coming months, the RBA may contemplate implementing a cash rate hike in early 2024,โ€ she said.โ€œHowever, any decisions regarding adjustments to the interest rate will likely hinge on economic developments and the implementation of the new โ€˜full employmentโ€™ definition, which will shed light on issues related to underemployment and labour underutilisation.”

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Kylie Dulhunty

Former Elite Agent Editor Kylie Dulhunty is a freelance content producer for the Elite Agent audience, leveraging her extensive copywriting and real estate expertise.