RBA raises cash rate to 4.10%
The RBA makes it 12 rate rises in 13 months.
The Reserve Bank of Australia (RBA) has raised the official cash rate by 25 basis points to 4.10%, the highest rate since 2012.
Despite many homeowners already feeling the pinch, stubbornly high inflation has given the RBA little choice but to raise the cash rate yet again.
As usual, this means mortgage holders with variable rates are looking at higher repayments, while savers could expect a better return on their money.
What next for rate rises?
As evidence of how volatile the market is, economist forecasts have significantly changed since the latest inflation figures were released.
Each month we ask a panel of experts where they think the cash rate will peak and this month the average increased by about 35 basis points, with a jump from 3.8% to 4.17%.
The majority (67%) also believe that this peak will be before September, so we are expecting more rate hikes over the next couple of RBA decisions.
That might sound scary, but there is better news for the long term!
Finder's head of consumer research, Graham Cooke, said, "the flood waters should start to subside" after the next 2 rate rises. Inflation is expected to slow and 85% of the economists believe Australia will be back at the 2% target in the June quarter next year.
"Inflation has bumped up a tad in April, but is still well below its December peak. The long-term forecast from our panel is for inflation to continue to decline, which should mean the cash rate does too," Cooke said.
What to do if you're struggling with your home loan
According to figures released by S&P Global, mortgage arrears rose over the first quarter of 2023. The report also called out refinancing becoming tougher for borrowers which is adding to arrear pressure.
If you're worried about being in mortgage stress, Finder recently built a calculator so you can see exactly where you stand.
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If you are struggling with your mortgage repayments, here are some things you can try:
- Take a look at your budget. Depending on the level of how much you are struggling, this may not help. But it's a good place to start. Take a look at what you've got coming in and then write down everything you have going out. You might need to be really strict on where you cut back.
- Speak to your lender. People often assume that banks won't care, but that's not actually true. Many banks are supporting their borrowers with hardship assistance, which could be through repayment pauses, lower interest rates or temporarily moving you onto an interest-only plan.
- Consider refinancing. The market is making it harder for a lot of borrowers to refinance, but it's worth looking into now before things get worse. You might be able to refinance your interest rate with your current lender, or another lender may be able to offer you a better deal.