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Finder’s RBA survey: $12K added to average yearly mortgage since April

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Homeowners have been hit with a ninth consecutive blow from the RBA.

In this month's Finder RBA Cash Rate Survey™, 44 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

Almost all panellists (95%, 42/44) predicted a cash rate rise in February, with the majority (91%, 40/44) correctly forecasting the increase of 25 basis points – bringing it to 3.35% in February.

The panel forecast that the cash rate will peak on average at 3.75%, with 3 in 4 who weighed in* (75%, 30/40) saying it will peak in the first half of 2023.

Graham Cooke, head of consumer research at Finder, said the average mortgage holder will be forking out over $12,000 more a year in interest compared to this time last year.

"Australians with the average loan size of around $600k will be paying $1,000 more per month compared to what they were paying in April last year.

"That's a significant amount of extra money to allocate towards your mortgage every month – especially when household budgets are already stretched thin."

Cooke encouraged homeowners to give themselves some breathing room by negotiating a more competitive rate with their lender.

"If that doesn't work, consider refinancing your home loan. Even trimming your rate half a percentage point can save you hundreds a month," Cooke said.

Average Aussie mortgage repayments

Cash rateAverage home loan rate*Average monthly repaymentAverage monthly increaseAverage annual repaymentAverage annual increase
Apr-220.10%3.45%$2,686-$32,232-
Dec-223.10%5.97%$3,597$911$43,164$10,932
Feb-233.35%6.22%$3,694$1,008$44,328$12,096
(full rate rise applied)

Source: Finder, RBA. *Owner-occupier variable discounted rate. Repayments based on the average loan of $601,793 (ABS data analysed by Finder).

Finder's Consumer Sentiment Tracker shows the proportion of households reporting they find it difficult to pay their mortgage has gone from 22% in January 2022, to 33% in December 2022.

Two-thirds of experts (66%, 21/32) believe this is an indicator of increased mortgage defaults in 2023.

How much Aussies need to earn to afford a home

Finder analysis shows it's increasingly difficult for the average Australian to get onto the property ladder.

To comfortably afford a $1.3 million house in Sydney (the median house value), your household will now need to earn more than $255K.

In Melbourne, prospective homeowners will need a combined income of over $174K to afford a $888K house, while those in Brisbane will need almost $148K for the median house value of $752K.

Sydneysiders hoping to purchase a $740,000 unit (the median unit price) will need a minimum household income of over $145K.

Those in Melbourne looking for an apartment will need $119K, while those in Brisbane will need a household income of over $92K.

The median personal income in Australia is $52,338, while the median annual household income is $90,792, according to the Australian Bureau of Statistics.

Cooke said despite property prices falling, the average first home buyer is still in a tough spot.

"With the cost of living on the rise and salaries failing to keep pace, homeownership – particularly in the capital cities – is slipping further out of reach for many.

"Prospective buyers are looking at borrowing significantly more than pre-pandemic levels, and with higher interest rates.

"For many, the dream of home ownership remains a fantasy," Cooke said.

Income needed to service the median house price

LocationPriceMinimum income required (assuming a 6.22% interest rate)
Sydney$1,300,000$255,327
Melbourne$888,000$174,408
Brisbane$752,250$147,746
Canberra$952,500$187,076
Hobart$741,000$145,537
Adelaide$660,000$129,628
Perth$550,000$108,023

Source: Finder analysis of Corelogic October 2022 data

*RBA data shows the average home loan rate for owner-occupiers in December 2022 was 5.97%. The 6.22% interest rate assumes banks and lenders will pass on the RBA's 25-basis-point hike in February.

Income needed to service the median unit price

LocationPriceMinimum income required (assuming a 6.22% interest rate)
Sydney$740,000$145,340
Melbourne$606,000$119,022
Brisbane$470,000$92,311
Canberra$580,000$113,915
Hobart$560,000$109,987
Adelaide$435,000$85,436
Perth$400,000$78,562

Source: Finder analysis of Corelogic October 2022 data

*RBA data shows the average home loan rate for owner occupiers in December 2022 was 5.97%. The 6.22% interest rate assumes banks and lenders will pass on the RBA's 25-basis-point hike in February.

Mortgage holders could be hit with even higher interest rates

Some lenders have already increased their mortgage interest rates by more than the RBA's cash rate rises.

3 in 5 panellists (61%, 20/33) believe more lenders will continue to do this in order to offset their increased borrowing costs.

Mark Crosby of Monash University noted, "Increased loan risk and lenders wanting to get ahead of rate rises will see rates rise with and faster than the cash rate."

Panellists also cited that banks may do this to maintain their own profit margins, and the need to offer competitive savings rates.

Shane Oliver from AMP said bank funding costs are rising beyond the rise in the cash rate and this is likely to be passed onto borrowers.

Independent director Peter Boehm said the banks need to recoup the higher interest they are paying out in savings rates.

"The banks have to start rewarding savers by increasing savings rates.

"When these start to rise, their interest margins will be squeezed which means the banks will need to recoup some of this loss through above-cash-rate mortgage increases," Boehm said.

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

Here's what our experts had to say:

Stephen Koukoulas, Market Economics (Hold): "Slow growth, an uptick in the unemployment rate and a sharp fall in inflation will allow a rate cut by year end."

Cameron Murray, University of Sydney (Hold): "Hard to see continued inflation pressure, and I expect that the US, Canada, NZ etc will also pause their rate rises now."

Andrew Wilson, My Housing Market (Increase): "Inflation concerns."

Tomasz Wozniak, University of Melbourne (Increase): "The forecasts from yield curve models using weekly and monthly rates as well as those from the models including quarterly inflation, inflation expectations and labour market conditions draw a similar picture: the interest rates will keep increasing until mid-2023 reaching the level of 3.5%, with a likely range from 3.1% to 3.9%. The models of quarterly data indicate sharper increase with a higher uncertainty. The year is likely to close with the cash rate at the level of 3.7%. The forecasts are available at https://donotdespair.github.io/cash-rate-survey-forecasts/"

Evgenia Dechter, UNSW (Increase): "The economy shows signs of a slowdown; however, the RBA might go with an additional rate increase to signal its determination to do 'whatever it takes' to fight inflation."

Mark Crosby, Monash University (Increase): "Latest inflation numbers warrant further rate rises at least until mid year."

Mala Raghavan, University of Tasmania (Increase): "The gradual upward movement of the cash rate is an anticipated monetary policy measure to dampen the rising inflation rate. These tightening measures are expected to continue to peak at around 3.75 in the middle of the year, after which the RBA is expected to ease the cash rate as the inflation rate falls. Though pressures from supply chain disruptions, commodity prices, upstream costs and consumer demand are easing, the pace at which inflation will fall will be slow due to the uncertain global economic and political environment."

Mark Brimble, Griffith Uni (Increase): "A further increase to dampen down lingering pressure and then likely to hold as the broader tightening over past months flow through the economy. This could change if US/Europe has a further breakout of headline inflation."

Tim Reardon, Housing Industry Association (Increase): "Because they inferred this in their recent statement. The RBA appears set to continue the roller coaster ride for the Australian economy, rather than waiting for their 2022 increases to take effect."

Anthony Waldron, Mortgage Choice (Increase): "We've recently seen the largest annual increase in inflation since 1990, so the Reserve Bank Board will be feeling pressure to kick off 2023 with another rise to the cash rate."

Christine Williams, Smarter Property Investing P/L (Increase): "Spending is easing, borrowing has reduced and the market is settling."

Brian Parker, Australian Retirement Trust (Increase): "Labour market is softening but not by enough to ease RBA's inflation concerns and the recent CPI data probably cemented the case for another move."

Garry Barrett, University of Sydney (Increase): "Inflation remains persistently high."

Stephen Miller, GSFM (Increase): "Because inflation has a lot more momentum than is appreciated by the market and perhaps the RBA."

Nicholas Gruen, Lateral Economics (Increase): "Because inflation has risen."

Harry Murphy Cruise, Moody's Analytics (Increase): "With inflation still much higher than desirable, a further rate hike in February is all but certain. We anticipate interest rates to stay at a peak of 3.35% through 2023, helping to gradually unwind current price pressures. As inflation returns to the RBA's target band of 2% to 3% in 2024, businesses and households will be in for a well-deserved reprieve as the board cuts rates from their contractionary levels."

A/Prof Mark Melatos, School of Economics, University of Sydney (Increase): "Inflation, especially the trimmed mean of the CPI, remains significantly above the RBA's target band. The RBA is still in catch-up mode with respect to matching their cash rate settings to the inflation reality. The RBA's hand is likely to be forced by continued monetary policy tightening by other central banks. This means the cash rate will likely need to be raised steadily throughout much of 2023. The RBA is only likely to pause raising the cash rate once the trimmed mean starts to fall."

Brodie Haupt, WLTH (Increase): "The current annual inflation rate in Australia is 7.8%, according to ABS data released on 25 January. It is almost certain the Reserve Bank will continue to increase the cash rate until the inflation begins to abate."

Leanne Pilkington, Laing+Simmons (Increase): "The Reserve Bank may feel it necessary to act in response to ongoing inflationary pressures; however, the rate rises of 2022 are having a major impact and households need a reprieve."

Jakob B Madsen, University of Western Australia (Increase): "The US FED funds rate is significantly higher than the RBA cash rate and inflation is still running high."

Matthew Greenwood-Nimmo, University of Melbourne (Increase): "Inflation is considerably higher than the RBA can tolerate."

Peter Munckton, Bank of Queensland (Increase): "Inflation is too high and interest rates need to be higher."

Cameron Kusher, REA Group (Increase): "Inflation just reached its highest yoy level since the early 90s with underlying inflation above forecasts. Can't see the RBA not hiking in this situation."

Nicholas Frappell, ABC Refinery (Increase): "CPI data and strong labour data suggest rates will continue on an upward path towards the expected Terminal rate."

James Morley, The University of Sydney (Increase): "The Q4 inflation was high enough that the RBA will want to be seen to respond. Also, international conditions are still not in recession, so the RBA will believe any downward external drag on economic conditions will come later than they might have previously worried about. I believe the RBA will signal more in advance before they pause. There has been no such signal yet. They could raise in the next two meetings, or three if they want to see the Q1 inflation number (being substantially lower) before pausing their increases. I think increases will be by 25bp increments, consistent with the RBA's recent 'gradualism' approach."

Alan Oster, Nab (Increase): "Need to address still too high inflation but not overdo the impact on the economy."

Jason Azzopardi, Resimac (Increase): "Inflationary concerns remain – no sign of change in spending habits exist."

Angela Jackson, Impact Economics and Policy (Increase): "The focus through 2023 will remain on containing inflation."

Noel Whittaker, QUT (Increase): "I believe the reserve bank will raise rates by 25 basis points on Tuesday week in light of the unexpected high inflation figures that came out on 25 January. However, the bank is aware of the lead effect and I still think they will be somewhat hesitant to raise rates too quickly in the future until they see whether the present rate rises are working as expected."

Stella Huangfu, University of Sydney (Increase): "Inflation for the past 12 months has been record high. Unemployment has remained at a very low level."

Nalini Prasad, UNSW Sydney (Increase): "While the effects of previous cash rate increases are still flowing through to the economy, underlying inflation remains strong. Inflation over the year to the December quarter 2022 was higher than expected by the RBA. The labour market remains strong. Monetary policy should be tightened to reduce inflationary pressures."

Mathew Tiller, LJ Hooker Group (Increase): "Despite the expectation that inflation will fall over the course of 2023, the latest quarterly CPI data release shows that it currently remains high."

Michael Yardney, Metropole Property Strategists (Increase): "While the RBA should wait to see how effective their 8 increases have been, they may be worried about leaving a rate rise too late, as happened early last year."

Craig Emerson, Emerson Economics (Increase): "The RBA will be spooked by the latest CPI figures."

Peter Boehm, Independent Director (Increase): "Inflation stubbornly towards top end of expectations and so the RBA will continue to raise rates until it starts reducing."

Tim Nelson, Griffith University (Increase): "Inflation is still tracking at high levels due to high demand as well as supply chain pressures."

Shane Oliver, AMP (Increase): "Underlying inflation surprised on the upside again in the December quarter and retail sales have remained solid so combined these are likely to tip the RBA over into another rate hike."

David Robertson, Bendigo Bank (Increase): "The latest CPI data revealing core inflation of 6.9% for 2022 has locked in another RBA rate hike in February to 3.35%, although this will mark the top of the inflation cycle so official rates should level off at 3.6% by May."

Dale Gillham, Wealth Within (Increase): "CPI is still rising and whilst it may be nearing its peak, the RBA does need to ensure this year that it is brought under control and the economy stabilised."

Matthew Peter, QIC (Increase): "Despite headline inflation nearing its peak, the RBA must continue delivering rate hikes at both their Tuesday meeting and in March. To not do so would invite market complacency that could result in too rapid an easing of financial conditions."

Stephen Halmarick, Commonwealth Bank (Increase): "High inflation."

Jeffrey Sheen, Macquarie University (Increase): "To consolidate the credibility of their inflation targeting."

Geoffrey Harold Kingston, Macquarie Business School (Increase): "Until around mid year it will look like 2 more 25bp rises will suffice. Then it will look like the budget has been too expansionary and wage inflation is too high. Late in the year there will be recession fears."

Rich Harvey, Propertybuyer (Increase): "Inflation figure is likely to come in around the 7% mark which is still way above the RBA comfort range."

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