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Finder’s RBA survey: $14K added to the average annual mortgage in 12 months

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Australian homeowners have been slapped with an 11th rate hike in 12 months.

In this month's Finder RBA Cash Rate Survey™, 42 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

More than half of panellists (55%, 23/42) correctly predicted a cash rate rise in May, with the majority of those (50%, 21/42) accurately forecasting the increase of 25 basis points, bringing it to 3.85%.

More than two-thirds of the panel (69%, 25/36) now expect that the cash rate has peaked.

However, a quarter of respondents (25%, 9/36) predict the cash rate will peak at 4% or higher.

The panel also forecasts an average cash rate of 3.75% by the end of 2023, 3.25% by the end of 2024 and 2.96% by the end of 2025.

Graham Cooke, head of consumer research at Finder, said the news is a heavy blow for many.

"Australians with an average loan size of $586K will be forking out around $14,000 more per year compared to what they were paying this time last year.

"The market consensus is that we are now at the peak of a frenzied, steep climb. The question yet to be answered is how well Aussie homeowners will be able to breathe in the thin air.

"If the RBA does ease the cash rate, it will likely do so gradually, with a watchful eye on inflation," Cooke said.

More than 2 in 5 (43%) Australians said their rent or mortgage was one of their most stressful expenses in April – the highest level since Finder's Consumer Sentiment Tracker started in May 2019.

Average Aussie mortgage repayments

Cash rateAverage home loan rate*Average monthly repaymentAverage monthly increaseAverage annual repaymentAverage annual increase
April 20220.1%3.45%$2,617-$31,404-
May 2023 (full rate rise applied)3.85%6.72%$3,792$1,175$45,504$14,100

Source: Finder, RBA. *Owner-occupier variable discounted rate. Repayments based on the average loan of $586,366 (ABS data analysed by Finder).

Interest rates might not drop to pre-pandemic levels

The monthly CPI inflation figure rose 6.3% in March down from 6.8% in February 2023.

The International Monetary Fund (IMF) has predicted that interest rates worldwide will fall back to pre-pandemic levels once inflation is brought down.

More than 1 in 2 experts (55%, 17/31) disagree with this prediction, indicating that interest rates are likely to remain elevated compared to pre-pandemic levels.

Cooke said interest rates just prior to the pandemic were historically low and inflation would need to drop significantly to meet those levels.

Mark Crosby from Monash University said pre-pandemic levels were artificially low.

"Rates will return to closer to more normal historical levels, rather than the levels immediately pre-COVID," Crosby said.

Stella Huangfu from University of Sydney said the inflation that we have seen since early last year was mainly due to the supply chain disruptions.

"Once the inflation pressure has eased, central banks will start cutting interest rates for sure," Huangfu said.

Petrol prices set to increase

With the Organization of the Petroleum Exporting Countries (OPEC) announcing surprise voluntary cuts to oil production, almost 1 in 2 panellists (46%, 11/24) predict that petrol prices will increase by the end of the year. Overall, experts forecast petrol prices will be 4% higher on average.

This would put prices at 195 cents per litre by the end of the year – up from 187.5 cents per litre as of 9 April.

Bloomberg has reported that diesel demand is on track to contract 2% in the US in 2023, with similar trends observed in other parts of the world.

Despite this, 4 in 5 panellists (81%, 17/21) do not believe that a drop in diesel consumption for transportation and manufacturing is a sign of a coming global recession.

According to Finder's Consumer Sentiment Tracker, 1 in 5 (22%) Australians said petrol was one of their top most stressful expenses in April.

This is down from 37% this time last year when petrol prices were skyrocketing to around 200 cents per litre, but still up from 8% in April 2020.

Cooke said the volatile petrol prices that we saw last year put a lot of financial strain onto Australians, with many dreading filling up at the pump.

"A decline in diesel could be linked to increased demand for electric cars, and isn't necessarily an indicator that we're heading into a global recession," Cooke said.

Dale Gillham from Wealth Within agreed.

"I just think this is a response to the world moving more to environmental sources such as electric powered trucks, vans, cars and other vehicles," Gillham said.

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

James Morley, The University of Sydney (Increase): "I think the RBA will treat April as a "pause" and note that rates could go higher as new data comes in. Inflation has peaked, confirming the reason for a pause in April. But it is still high at 7% and some of the underlying reasons (energy prices, rents) are expected to persist. Higher inflation means less of an increase in real rates from past actions than anticipated. So a further 0.25 ppt increase could be justified on that basis."

Jonathan Chancellor, The Daily Telegraph (Hold): "The RBA will hold off its next rate increase, but more are coming."

Tomasz Wozniak, University of Melbourne (Increase): "The new reading of the CPI inflation reaching 7% in the first quarter of 2023 aligns the quarterly forecasts with the monthly indicating the cash rate at 3.77% within the next 3–5 months. The prediction bands around this value reach from 3.4–4.1 %. My interpretation is a likely raise by 15 pp this or next month. Beyond this horizon, the forecasts diverge with the bond yield curve modelling indicating further increases and the system focusing on inflation, labour market and expectations showing cuts. The arrival of new macro data occurs essential in such dynamically changing circumstances."

Andrew Wilson, My Housing Market (Increase): "Clearly slowing economy continues unimpeded by rate rises with services inflation now on the rise – missed opportunity over April for Bank to keep pressure on inflation."

Nicholas Gruen, Lateral Economics (Increase): "It's line ball this week, but the Bank may want to raise rates before the budget so as not to be seen to raise them after the budget."

Harry Murphy Cruise, Moody's Analytics (Hold): "Price pressures are undoubtedly easing. And with the lagged impact of monetary policy, another pause to assess how the backlog of rate hikes is working is warranted. We expect the board to hold rates steady at its next meeting, keeping a rate hike in the back pocket for June if needed. In the meantime, board members will want to see heat come out of the red-hot labour market and retail sales moderate. If that doesn't happen, you can bet your bottom dollar the board will reach into that back pocket. We put the odds of that happening at 65%."

Sean Langcake, BIS Oxford Economics (Increase): "Inflation has peaked, with cooling global inflation now starting to weigh heavily on goods and tradables inflation. However, core inflation pressures remain strong, owing to very tight labour and rental markets. These sources of inflation will be persistent. The question now becomes how quickly the RBA wants inflation to return to target. They have been surprisingly dovish in some communications, but we still expect further tightening with an eye toward maintaining credibility and anchoring expectations."

Angela Jackson, Impact Economics and Policy (Increase): "The latest inflation figures will provide enough justification for the RBA board to move again on rates, with services inflation in particular likely to weigh heavily on their decision."

Malcolm Wood, Ord Minnett (Increase): "Jobs growth and services CPI too high."

Shane Oliver, AMP (Hold): "Inflation has now peaked and is falling a bit faster than the RBA expected. Although it's a close call this bolsters the case along with increasing evidence of slowing growth and a cooling labour market for the RBA to leave rates on hold in May ahead of an eventual cut in rates to support struggling economic growth from later this year and through 2024."

Anthony Waldron, Mortgage Choice (Increase): "The latest economic data points to a cash rate increase in May. The labour market data for March was strong, and the latest Consumer Price Index (CPI) data from the ABS revealed inflation remained high in the March quarter, leaving the RBA with little choice but to raise the cash rate."

A/Prof Mark Melatos, School of Economics, University of Sydney (Hold): "Inflation has moderated slightly recently. This is likely to encourage the RBA to pause rate hikes to get more clarity on how previous hikes have impacted the economy."

Mark Crosby, Monash University (Increase): "While inflation is coming down slowly, the real interest rate is still low, warranting at least one more rate rise, though more likely June or July than in this meeting."

Matthew Greenwood, University of Melbourne (Increase): "Inflation is still significantly above target and the RBA cannot risk it becoming entrenched."

Nalini Prasad, UNSW Sydney (Hold): "The RBA recently paused their sequence of rate rises to assess how previous rate rises have impacted the economy. They could continue to do that this month. Despite some recent moderation in price growth, inflationary pressures in the economy are still strong. Of particular concern is that market service inflation and rental inflation is still relatively high. The former which capture labour costs suggest that interest rate rises have so far lacked a large bite in the services sector."

Saul Eslake, Corinna Economic Advisory Pty Ltd (Hold): "Today's March quarter CPI and monthly March CPI indicator provide further evidence that inflation, though still "unacceptably high", is at least clearly now heading in the right direction (i.e. down). And with a good deal of the effects of the monetary policy tightening still to be felt, the RBA can again leave its policy settings unchanged at its May Board meeting."

Leanne Pilkington, Laing+Simmons (Increase): "It appears at least one more rise is on the agenda so despite the additional pain it will cause, the RBA will perhaps take the view of the sooner, the better."

Evgenia Dechter, UNSW Sydney (Hold): "The RBA might hold the rates due to the slowdown in inflation, at least until more data on labour markets and wages are available."

Stella Huangfu, University of Sydney (Hold): "It is obvious from the CPI data released today that the inflation has peaked. The RBA should keep the cash rate on hold for at least one more month to see the full effect of the 3.5% increase in the cash rate since May 2022."

Tim Reardon, HIA (Increase): "The RBA has only paused."

Rich Harvey, Propertybuyer (Increase): "Inflation is still too stubbornly high at 7%. The RBA needs to see a material declining trend before they fully pause."

Mathew Tiller, LJ Hooker Group (Increase): "Despite the most recent fall in the CPI, inflation remains too high and employment markets are tight which should prompt the RBA to increase the cash rate."

Nicholas Frappell, ABC Refinery (Hold): "March CPI coming in weak gives the RBA more time to ponder the rate pathway."

David Robertson, Bendigo Bank (Hold): "The RBA will maintain a tightening bias throughout 2023, and another hike to 3.85% can't be ruled out this year, but the welcome lower read on core inflation for Q1 provides scope for a further pause in rate hikes for now."

Stephen Miller, GSFM (Hold): "I think the inflation environment will mean another increase after the release of the June quarter CPI on July 26th."

Tina Teng, CMC Markets (Increase): "Inflation stays at a high level, and labour markets stay tight."

Brodie Haupt, WLTH (Increase): "Although inflation has slightly fallen in March, price pressures remain elevated in some key CPI components. The labour market also remains very tight."

Garry Barrett, University of Sydney (Increase): "Persistently high inflation."

Cameron Kusher, REA Group (Increase): "It's a very unconfident 25bp hike pick. Inflation was about where expected but the outcome of the RBA Review was pretty clear that they expect the RBA to be much more focused on keeping inflation at the middle-point of the band. Of course the RBA Review is not implemented but the messaging was clear and I think it offers the RBA cover to increase rates again."

Alan Oster, Nab (Hold): "Inflation better than expected and economy softening. Pays to wait further and by then the economy may well be flat lining."

Peter Munckton, Bank of Queensland (Hold): "Inflation is still too high."

Michael Yardney, Metropole Property Strategists (Increase): "The latest inflation figures leave the RBA with a dilemma. We are past the peak of inflation, but the latest figures are likely to be too high for the RBA's liking. However they would be encouraged by the "trimmed mean measure" which removes the most volatile price moves – which fell from 6.9% in December to 6.6% in the latest figures."

Jeffrey Sheen, Macquarie University (Hold): "The RBA paused its rate hikes in April because it wanted to wait and see whether inflation was responding to previous tightening and because of the evident risks of financial instability and a credit crunch. The March quarter inflation has revealed that the peak has probably been reached. However services inflation is still rising, but that should abate this year as catch-up from the lost COVID lockdown years is completed. The RBA should continue to wait and see, and to avoid a credit crunch that would risk a recession. Though much uncertainty remains, there is a fair chance of normalisation through 2023 so that interest rates can begin to moderate."

Cameron Murray, University of Sydney (Hold): "Despite the pause on rates last month, the economy seems to be getting a second wind. If the expected reduction of inflation arrives too slowly, the RBA may choose to raise rates again. This seems more likely at the moment than a reduction in rates during 2023. So does a pause count as a peak?"

Tim Nelson, Griffith University (Hold): "RBA has been targeting inflation through a rapid series of rate rises. With global outlooks becoming less optimistic, rates may have peaked. Much depends on Australian governments and their approach to fiscal policy."

Dale Gillham, Wealth Within (Increase): "CPI rose in the December quarter and the March quarter figures are due this coming week and I suspect whilst it may report a decrease in CPI, it is unlikely to be enough. The RBA generally over shoots interest rate rises and I think we will see one more in the next month."

Noel Whittaker, QUT (Increase): "They have made it very clear that rate rises are not yet finished – and if you can believe the media it was line ball at the last meeting."

Jason Azzopardi, Resimac (Hold): "Allow recent increases to flow through for a period of time before further data suggests an increase is necessary."

Jakob Madsen, University of Western Australia (Hold): "Inflation is still high and the economy has not yet shown signs of weakness."

Geoffrey Harold Kingston, Macquarie Business School (Increase): "Last month I quoted a David Bowie song: "It's too late to be late again." The Bank proved me wrong then, but not this month, I think."

Stephen Halmarick, CBA (Increase): "One last rate hike in May, before easing gets underway by year-end."

Craig Emerson, Emerson Economics (Hold): "The RBA has done more than enough tightening. The economy is slowing and there is no evidence of a wage-price spiral. Further tightening would risk a recession."

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