Big banks predict at least four interest rate rises in six months
Australia’s big four banks say interest rates will rise at least four times in the six months after the May federal election, amid Reserve Bank concern over inflation pressures.
With the average mortgage for an established home in Victoria currently at about $650,000, senior economic correspondent for The Age, Shane Wright, says it’ll mean households are paying about $400 a month extra.
“The financial markets reckon the reserve bank is going to get even more aggressive by the end of next year and have the cash rate up around 3.4 per cent. That would cost you about $1600 a month extra if we get to that point,” he told Stephen Quartermain and Emily Power, filling in for Ross and Russel.
But Mr Wright doesn’t believe it’ll reach that point.
“I think that’s just a little bit over the top because I can see most of the country would be finding that very problematic … especially if there’s no real movement in wages,” he said.
“The RBA is not a bunch of fools, they know how much debt people are carrying and they will have worked out ‘Right, we won’t have to lift interest rates as much as we would have had to 10, 15 or 20 years ago to get the desired effect that we want’.”
Inflation is currently at 3.5 per cent and will rise to four per cent next month.
The Reserve Bank aims to keep inflation between two and three per cent.
Press PLAY below for a no-nonsense explanation of what’s likely to happen + what it means to households
NAB CEO Ross McEwan confirmed the prediction with Tom Elliott, saying he expects there to be around ‘three or four’ interest rate rises this year.
“I see that between now and the end of the year you’re probably going to get three or four interest rate rises between 15 and 25 basis points,” he said on 3AW Mornings.
“So what we call the overnight cash rate will be at about one per cent, and that does impact on the borrowings people have on their home.”
Press PLAY to hear more from NAB CEO Ross McEwan below
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