There’s likely to be more pain ahead for borrowers, with 91 per cent of experts tipping the official cash rate to rise tomorrow, according to a new survey.
The Finder RBA Cash Rate Survey has found 29 of 32 experts believe the cash rate will increase at the July Reserve Bank of Australia meeting, with two-thirds predicting a 50 basis point hike.
Additionally, one-third (11/32) believe there will be four rate increases in a row, with back-to-back cash rate increases in July and August.
Peter Boehm from Pathfinder Consulting said rates would continue to rise aggressively because the RBA took so long to act.
“The RBA has left itself no alternative but to increase the cash rate, and to increase it sharply,” Mr Boehm said.
“I would not be surprised to see the rate above 2.5 per cent by year end and this will create what would have otherwise been an avoidable shock to the economy, had rates been increased earlier and by smaller increments.”
Head of Financial Markets and Business Finance Solutions at Bendigo Bank, David Robertson, said the RBA is likely to keep aggressively hiking this year.
“The RBA has now committed to front loading rate hikes in response to the global inflation shock, so should increase rates by another 50 basis points in July,” he said.
“This will continue the path to a neutral cash rate of around 2.5 per cent by November, before pausing to assess the impact on demand and on inflation.”
Head of consumer research at Finder, Graham Cooke, said consecutive rate rises are likely to make life difficult for borrowers.
“It’s looking almost certain that Australian households will be faced with a triple-whammy of rate rises this year,” Mr Cooke said.
“This will raise the average annual mortgage repayment by over a whopping $5000 – a huge burden for most families.”
Mr Cooke said many homeowners would struggle to meet these higher payments.
“A 50 basis point rate increase will see the average Aussie homeowner forking out an additional $324 per month compared to what they were paying in May,” he said.
“That’s a significant bump for those who are already feeling the cost of living crunch.”
Despite rising interest rates, three in four experts believe the cash rate would have to increase to 3 per cent or higher to push at least a third of households into mortgage stress.
In June, 25 per cent Aussie homeowners said they struggled to pay their mortgage, up from 21 per cent in May, according to Finder’s Consumer Sentiment Tracker.
Falling property prices
More than half of the experts surveyed believe property prices will fall by 15-20 per cent in both Sydney and Melbourne by 2025.
In Brisbane, Adelaide, and Perth, at least 40 per cent of panellists believe property prices will fall by 10 per cent.
Mr Cooke said house prices were likely to fall in the second half of 2022.
“Australians are obsessed with property, but home ownership has been a distant dream for many,” he said.
“How steeply prices fall will depend on how high interest rates climb and how quickly they get there.”
Minimum wage increase
Almost all (95 per cent) experts agreed with the decision from the Fair Work Commission to increase the minimum wage,
Research fellow of Henry Halloran Trust, The University of Sydney, Cameron Murray, said there is no clear reason that those with the lowest incomes should need to take a real income decline because of inflation.
“Indeed, even wage rises that match inflation are generally not sufficient to maintain the same after-tax income because of Australia’s progressive tax and welfare system,” Mr Murray said.
“Much higher wage rises are needed for that.”
A Finder survey of 682 Aussie workers found one in five (21 per cent) are expecting a larger wage rise this year than they received in 2021 to offset surging inflation.
However, 5 per cent of Australian workers are expecting a decrease in pay despite cost-of-living pressures.