Hike rates

RBA could hike rates in May amid soaring inflation

Data released today by the Australian Bureau of Statistics shows that headline inflation has hit 5.1% over the past 12 months, confirming Australians’ concerns over the cost of living and raising the likelihood of a interest rate hike ahead of the election.

On a quarterly basis, the Consumer Price Index (CPI) rose 2.1%. ABS price statistics manager Michelle Marquardt notes that the quarterly and annual increases were the largest since the introduction of the goods and services tax.

Price increases were recorded for a range of goods in March, but the surge was largely driven by rising costs for new homes (+5.7%), car fuel (+11.0%) and higher education (+6.3%).

“The continued shortage of building materials and labor, rising transportation costs and continued strong demand have contributed to higher prices for newly built homes,” Marquardt said.

“The CPI auto fuel series hit a record high for the third straight quarter, with fuel price increases seen in all three months of the March quarter.”

Households also had to deal with a 2.8% rise in food prices, reflecting “high transport, fertilizer, packaging and ingredient costs, as well as COVID-related disruptions and restocking of herds. due to favorable weather conditions.

The food prices that increased the most were vegetables (+6.6%), water, soft drinks and juices (+5.6%), fruit (+4.9%) and beef (+7. 6%).

RBA plays catch-up

ABS data revealed that average annual adjusted inflation, which dampens atypical price swings, rose to 3.7%. As the RBA’s preferred gauge of inflation, the result is perhaps the strongest sign yet that a rate hike is imminent.

Compared to its central bank counterparts, the RBA has been reluctant to start tightening monetary policy, weighing the surge in prices against the strong job and wage growth that lower rates would bring.

But inflationary pressures, caused by supply chain disruptions and compounded by Russia’s invasion of Ukraine, have persisted far longer than more dovish policymakers like the RBA governor would have liked. , Phillip Lowe.

This month, the Bank of Canada and the Reserve Bank of New Zealand raised their key rates by 50 basis points, and the US Federal Reserve signaled its willingness to do the same at its next meeting.

With headline inflation expected to top 6% and the RBA potentially catching up with central banks around the world, some analysts believe the RBA could be forced to raise interest rates to 0.5% in a single session.

What will rising rates mean for your mortgage?

Variable rates on home loans tend to move with the cash rate, so any decision by the RBA will likely be passed on to any mortgage holders who have not secured their loan.

The calculator below can give an idea of ​​the increase in borrower repayments in the event of rate increases of different sizes.

Fixed rates, on the other hand, have been on an upward trend for some time now. While the big banks led the charge in cutting fixed rates in 2020, rising costs of funds have since forced them to back down – and the majority of lenders have followed suit.

With the exception of Unity Bank’s 1.84% pa (4.05% pa*) offer for first-time home buyers, fixed rates below the 2% mark per year have all disappeared

In fact, looking at the 4-year tenors, we see that the major banks have more than doubled the fixed rates on their fixed-price loans since November 2020.

Term November 2020 April 2022
ANZ 2.29% (3.77% rate of pay) Discontinued product
CommBank 1.99% (3.66% pay rate) 4.39% (4.45% rate of pay)
NAB 1.98% (3.69% pay rate) 4.19% (4.41% rate of pay)
Westpac 1.99% (3.29% pay rate) 4.49% (4.10% rate of pay)

For more information on mortgage and lending trends, visit our home loan statistics page. And if you’re looking for a home loan, visit our home loan comparison page or browse the selection below.

ATTENTION: This comparison rate only applies to the example or examples given. Different amounts and durations will result in different comparison rates. Costs such as withdrawal charges or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed corresponds to a guaranteed loan with monthly principal and interest repayments of $150,000 over 25 years.

Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on the amount of your loan, the term of the loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.

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