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Finder’s RBA survey: Cash rate hike to cost the average homeowner $424 a month

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Homeowners on a variable rate mortgage will be paying hundreds more per month in interest, according to Finder.

In this month's Finder RBA Cash Rate Survey™, 31 experts and economists weighed in on future Reserve Bank of Australia cash rate moves and other issues relating to the state of the economy.

The majority of panellists (94%, 29/31) correctly predicted a cash rate rise in July of 50 basis points from 0.85% to 1.35%.

Graham Cooke, head of consumer research at Finder, said the combined cash rate hikes will cost the average Aussie homeowner over $5,000 over the course of a year.

"This is tough news for many homeowners, with 1 in 4 already struggling to meet their monthly mortgage payments in June.

"There's no light at the end of the tunnel just yet, with our panel forecasting at least 2 more rate rises to come. This will put further downward pressure on a rapidly deflating housing market."

Two-thirds of experts who weighed in* (65%, 23/27) believe the cash rate will peak at 2.50% or higher.

Almost half (48%, 13/27) agree it will peak in early 2023.

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How much this will cost Aussie homeowners

Cooke said while some lucky homeowners on a fixed rate wouldn't be impacted by today's decision, they should start planning for when their home loan repayments inevitably do go up.

"The average homeowner who isn't on a fixed rate will see their monthly repayments jump by $424 compared to what they were paying in April this year.

"For those who are on a fixed rate – check now to see how high your monthly repayments are likely to jump.

"Your fixed home loan could be a ticking time bomb if you aren't prepared," Cooke said.

Cash rateAverage home loan rate*Average monthly repaymentAverage annual repaymentAverage annual increase
(current rate as of 5 July)
(predicted peak)
Source: Finder, RBA. *Owner-occupier variable discounted rate. Repayments based on the average loan of $611,158 (ABS data analysed by Finder). Predicted average home loan rate of 5.10% is based on historical RBA data.

Grocery bill stress at an all-time high

In the 12 months to March 2022, the price of vegetables increased by 12.7% and the price of beef and veal increased by 12.1%, according to the Consumer Price Index.

Australians are already feeling the pinch, with more than a third (34%) ranking groceries as 1 of their top 3 most stressful expenses in June, according to Finder's Consumer Sentiment Tracker.

Before 2022, the highest this figure had reached was 24% in June 2021. This is the first time grocery bill stress was even higher than rent/mortgage stress (28%).

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Cooke said there was more than one factor affecting the cost of goods.

"There are 2 main drivers of grocery price inflation – the war in Ukraine and the weather on the east coast. Fuel and fertiliser are more expensive, and many crops have been decimated by heavy rain. Neither is likely to end any time soon."

Almost all panellists (91%, 20/22) believe goodwill measures such as Woolworths' decision to put a price freeze on many essential items will help household budgets.

Leanne Pilkington of Laing+Simmons noted, "At a delicate time like this every little bit helps."

Dale Gillham of Wealth Within said it brings certainty to families and this helps them stick to a budget.

"It also benefits Woolworths as shoppers will not hunt for the best prices at other retailers," Gillham said.

However, some panellists commented that such measures will do little to ease cost of living pressures in the long term and will likely involve price rises in other product lines.

Nicholas Frappell of ABC Bullion said it was only a quick fix.

"Short term it is a positive, especially given the level of weak competition in the Australian corporate sector, although it is not a medium- to long-term solution," Frappell said.

Inflation tipped to hit 7%, negativity continues towards cost of living

The majority of panellists (72%, 18/25) agree with RBA governor Philip Lowe's forecast that inflation will reach 7% by the end of 2022.

With those who disagreed, the overwhelming majority (72%, 5/7) said inflation would reach 6% or higher by the end of the year.

Peter Boehm of Pathfinder Consulting said upward pressure on prices had been building for some time from a number of sources, both internal and external.

"As the push for higher wages gathers momentum across the economy, this will inevitably lead to higher prices for goods and services. Plus, the new federal Labor government's spending programme is likely to add inflationary fuel to the fire," said Boehm.

Finder's Economic Sentiment Tracker gauges experts' confidence in 5 key indicators: housing affordability, employment, wage growth, cost of living and household debt.

While negativity towards cost of living has eased slightly from last month (96%), it remains steadily high at 77%.

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

Here's what our experts had to say:

Dale Gillham, Wealth Within (Hold): "The 50 basis point rise in June was quite a shock to everyone and so I suspect the RBA will wait to see what effect it has prior to issuing any more rises."

Tim Reardon, Housing Industry Association (Hold): "The cash rate remains expansionary and unemployment remains exceptionally low."

Tim Nelson, Griffith University (Increase): "Continued tightening to address rising inflation."

Sveta Angelopoulos, RMIT (Increase): "Inflationary pressures need to be addressed. Moving quickly and sharply in the short term will send very concrete messages to markets and may avoid longer-term pain down the track."

David Zammit, Mortgage Choice (Increase): "I expect the Reserve Bank to again raise the cash rate in July as it continues measures to normalise the cash rate and curb inflation. As home loan interest rates climb, borrowers are seeking better deals on their home loan, with Mortgage Choice home loan submission data showing a pick-up in refinancing activity during May."

Sean Langcake, BIS Oxford Economics (Increase): "The RBA have clearly signalled they are just at the beginning of their tightening phase. Slowing down to a 25 basis point rise makes little sense in light of the June hike."

Harry Murphy Cruise, Moody's Analytics (Increase): "The RBA has upped the ante on inflation and is working overtime to make up lost ground. But it's not just actual price rises that are cause for concern. Phil Lowe knows he only has a small window to tame expectations. And that will see the Board again go hard in July."

Nicholas Frappell, ABC Bullion (Increase): "Inflationary pressures remain in place and most indicators suggest that the economy remains in decent shape at this point in time."

Brodie Haupt, WLTH (Increase): "With continued uncertainty and rising pressure from inflation, I think it is likely there will be another rate rise this month."

Mathew Tiller, LJ Hooker Group (Increase): "The RBA is expected to continue to increase the cash rate until the strong inflationary pressures begin to subside. As such, I expect the RBA will lift rates multiple times over the remainder of 2022."

Cameron Kusher, REA Group (Increase): "Inflation is surging and the RBA have signalled that they are going to do whatever they can to reduce it, which means lifting the cash rate."

Alan Oster, Nab (Increase): "RBA still adjusting rates to slow activity and lower inflation."

Jonathan Chancellor, The Daily Telegraph (Increase): "They need to act decisively, not dawdle in their pursuit of increased rates so they then have the option to re-use the rate lever to avoid any recession."

Shane Oliver, AMP (Increase): "The cash rate at 0.85% remains too low for an economy with a 3.9% unemployment rate and inflation on its way to 7% by year end. The RBA needs to continue raising rates for now to underline its commitment to returning inflation to its 2–3% target range and ensuring that inflation expectations remain low."

Nicholas Gruen, Lateral Economics (Increase): "The RBA has been signalling its readiness to tackle inflation. Given the indebtedness of Australian households, it will be a difficult tightrope to walk."

David Robertson, Bendigo Bank (Increase): "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. This will continue the path to a neutral cash rate of around 2.5% by November, before pausing to assess the impact on demand and on inflation."

Azeem Sheriff, CMC Markets APAC (Increase): "CPI released in July and October 2022, so expecting RBA to react to CPI numbers and adjust rates accordingly in July, August, September, November and December meetings to bring cash rate to 2.35%. RBA will monitor for Q1 23 then when next CPI figures release in Apr for Q1, RBA will react again in May's meeting for next hike. Potentially 1 more in Q3 to bring cash rate to 2.75%. Anything further aggressive tightening more than 25bps could severely contract economy giving rise to fears of an AUS recession. GDP figures will also be on watch in September, December and March 23 which can significantly contribute to RBA's decision."

Sarah Hunter, KPMG (Increase): "The most recent comments from Governor Lowe and the June meeting minutes make it clear that the RBA are now proceeding with rate normalisation at a rapid pace, which suggests a further 50bps increase in the July meeting."

Leanne Pilkington, Laing+Simmons (Increase): "We all know further rate increases are coming. While the recent hikes have certainly impacted consumer sentiment, we believe a more modest increase is warranted this time around to provide time to understand the full economic impact of the May and June increases."

Noel Whittaker, QUT (Increase): "The reserve bank have been shouting it from the rooftops."

Geoffrey Harold Kingston, Macquarie University (Increase): "RBA is finally biting the bullet."

Peter Boehm, Pathfinder Consulting (Increase): "The RBA has left itself no alternative but to increase the cash rate, and to increase it sharply. I would not be surprised to see the rate above 2.5% by year end and this will create what would have an otherwise been an avoidable shock to the economy, had rates been increased earlier and by smaller increments."

Mark Brimble, Griffith Uni (Increase): "Inflation pressure continues to grow and the need to normalise rates is evident."

Jeffrey Sheen, Macquarie University (Increase): "The anchor for inflation expectations needs to be re-established by the RBA demonstrating its commitment to its inflation target."

Jakob B Madsen, University of Western Australia (Increase): "Inflation too high."

Stephen Halmarick, Commonwealth Bank (Increase): "A global monetary policy tightening cycle is well underway."

Craig Emerson, Emerson Economics (Increase): "The RBA governor has publicly stated so."

Saul Eslake, Corinna Economic Advisory (Increase): "My view reflects the RBA's heightened sense of urgency in getting its cash rate to at least 2.5%, and possibly higher, in order to give effect to its stated determination to get inflation down to its 2–3% target range."

Jason Azzopardi, Resimac (Increase): "Current levels are emergency levels only and combined with high inflation, there is no need for the RBA to move slowly."

Michael Yardney, Metropole Property Strategists (Increase): "The RBA is now "laser focused" on bringing inflation under control."

Cameron Murray, Henry Halloran Trust, The University of Sydney (Increase): "There is a bigger global context here. Other central banks are hiking consistently. Australia has similar inflation pressures. So the RBA will act in a way that is consistent with central banking norms."

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