Finder’s RBA survey: $815 added to a $500K monthly mortgage cost since April
Aussie mortgage holders have been dealt a seventh consecutive rate hike and can expect to pay hundreds more in interest per month, according to Finder.
In this month's Finder RBA Cash Rate Survey™, 39 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.
Almost all panellists (97%, 38/39) predicted a cash rate rise in November, with the majority (92%, 35/39) correctly forecasting the increase of 25 basis points – bringing the cash rate to 2.85% in November.
Graham Cooke, head of consumer research at Finder, said Aussies with a $500,000 mortgage will be paying $815 more a month compared to just 7 months ago.
"This seventh consecutive rate hike – 275 basis points in total – will be a bitter pill to swallow for many.
"The current series of rate hikes has added almost $10,000 to the annual cost of a $500K mortgage."
|Cash rate||Average home loan rate*||Average monthly repayment||Average monthly increase||Average annual repayment||Average annual increase|
|November (current rate as of 1 November)||2.85%||6.15%**||$3,046||$815||$36,552||$9,780|
|Source: Finder, RBA. *Owner-occupier variable discounted rate. Repayments based on a $500,000 loan|
|**Expected rise to current average rate|
Inflation has yet to peak
Australia's annual inflation rate (7.3%) is at its highest level since June 1990, according to ABS data.
Almost two-thirds of experts who weighed in* (62%, 8/13) forecast that CPI inflation will continue to increase and reach beyond 7.5% by the end of 2022.
Cooke said inflation and cash rate rises are already causing stress for thousands of Aussie households.
"Finder research is showing a significant increase in the number of households indicating housing, groceries and petrol as causes of financial stress.
"According to the experts, the factors causing these price increases are likely to hang around for many months, meaning no relief on the horizon for households."
Finder's Consumer Sentiment Tracker of over 30,000 Australians shows that the percentage of people stressed about housing – rent or mortgage – has jumped from 31% in July to 51% in October.
The number of those reporting financial stress about groceries is at an all-time high as well. In October 2021, just 1 in 5 (20%) reported feeling stressed about their grocery bills. In October 2022, this figure now sits at nearly 2 in 5 (38%).
Dale Gillham from Wealth Within said the next few months into 2023 will see inflation rise.
"The biggest pressure on inflation is energy costs and I do not think we are doing enough to curb this.
"While housing costs are somewhat easing, we are seeing rent and interest rates increasing, putting further pressure on households. Now with all the floods, food and other costs will rise," Gillham said.
Petrol prices to rise by 10–20% next year
The Organisation of the Petroleum Exporting Countries (OPEC) recently announced it intends to cut output by 2 million barrels per day. As such, the majority of Finder's panellists (59%, 10/17) forecast that petrol prices will rise by 10–20% over the next 12 months.
With the average price of petrol sitting at $1.82 per litre in October, this would see the average price of petrol reach between $2.02 and $2.18.
Cooke said with petrol prices causing more stress than ever, this won't be welcome news for Aussie motorists.
"Almost a third (28%) of Australians list petrol as one of their most stressful expenses – it's no wonder we are seeing a surge in interest in renewable energy and electric cars.
"Finder research shows volatile petrol prices are the reason 13% of Australians – equivalent to 2.6 million people – are now considering ditching conventional cars," Cooke said.
With the war in Ukraine escalating over September and October, almost two-thirds of panellists (63%, 15/24) also forecast higher energy prices in 2023.
Nalini Prasad from UNSW Sydney said Russia's invasion of Ukraine led to significant increases in energy prices.
"There is now evidence that price increases that emerged on the spot market have now spread to the whole term structure of futures energy prices.
"This indicates that energy costs will remain high in 2023," Prasad said.
*Experts are not required to answer every question in the survey
Here's what our experts had to say:
Anthony Waldron, Mortgage Choice (Increase): "I expect the Reserve Bank will raise the cash rate in November. Inflation remains high and the latest data from the Australian Bureau of Statistics reveals a strong labour market."
Tomasz Wozniak, University of Melbourne (Increase): "The forecasts from the bond-yield curve models I estimated consistently indicate an increase in the value of the cash rate until mid-2023, after which levelling off should follow. By that time, the cash rate will nearly surely be higher than 3.6%, will most likely reach 4%, and is unlikely to exceed 4.4%. This would mean that the interest rates might get to the levels from early 2012."
Sveta Angelopoulos, RMIT University (Increase): "Although there is some indication of slowdown, it is still not sufficient from a monetary policy perspective. A further increase in the cash rate is likely to be required to bring down inflationary pressure."
Tim Reardon, Housing Industry Association (Increase): "This week's CPI data will see the last increase before they pause to see the impact of this rapid increase in the cash rate."
Garry Barrett, University of Sydney (Increase): "Inflation yet to be fully under control."
Malcolm Wood, Ord Minnett (Increase): "Without a peak in inflation, rise in unemployment, data weakness or material fiscal tightening the RBA is probably set to raise again."
Craig Emerson, Emerson Economics (Increase): "The RBA has already said so."
Peter Boehm, Pathfinder Consulting (Increase): "Inflation not yet under control so rates will increase – but the increases will be less severe."
Cameron Murray, University of Sydney (Increase): "Global momentum."
Shane Oliver, AMP (Increase): "Inflation remains an ongoing problem, demand is still strong and the RBA has signalled likely further rate hikes ahead."
Alan Oster, NAB (Increase): "This in tightening phase and need to go above neutral."
Mathew Tiller, LJ Hooker Group (Increase): "Inflation remains very high and the RBA will continue to lift rates, despite a deterioration in the outlook for the global economy, to bring under control."
Nicholas Gruen, Lateral Economics (Increase): "They've indicated a desire to."
A/prof Mark Melatos, School of Economics, University of Sydney (Increase): "Inflation is significantly above the RBA's target band and likely to increase further, notwithstanding declining oil prices and an increasing risk of global recession. Like most central banks, the RBA was slow to recognise the inflation threat and its policy settings need to catch-up to the inflation reality. Moreover, the RBA's hand is likely to be forced by increasingly aggressive tightening by other central banks. This means the cash rate will likely need to be raised steadily in the near future with a likely pause from mid-2023 as the RBA assesses the impact of its tightening strategy."
Matthew Greenwood-Nimmo, University of Melbourne (Increase): "Inflation is high and more rate rises are needed to bring it under control."
Rich Harvey, Propertybuyer (Increase): "There's still further RBA rate rises to go before the inflation genie gets put back in the bottle. Likely that inflation will peak this quarter then slow down next year. Australia is doing much better than other countries. Likely that there will be more 0.25% increases each month rather than larger moves as the RBA is watching the impact on other sectors very closely."
Brodie Haupt, WLTH (Increase): "The Reserve Bank will continue to increase the cash rate until the inflation begins to abate."
James Morley, The University of Sydney (Increase): "I think they've signalled one more hike and then wait to see effects of previous hikes and developments in the global economy."
Azeem Sheriff, CMC Markets APAC (Increase): "We saw the RBA pivot to a 25pt vs 50pt [rise] as RBA hold monthly meetings and the pace of hiking is relatively similar to the pace of hiking by the Fed and they have a much higher inflation rate. RBA could afford to turn it down a notch. With CPI numbers coming this month and expected to be around 7% headline, it will still take a few months to see a material change in the pace of inflation, better yet, a pivot/peak. RBA has forecasted a peak around 7.75% in 2023."
Leanne Pilkington, Laing+Simmons (Increase): "While there's a good chance the RBA will raise rates again on Cup Day, the case for month-on-month increases is weakening. At some stage soon, mortgage holders will need a reprieve, as larger repayments are already having a significant impact on household budgets."
Mark Crosby, Monash University (Increase): "Rates are still below neutral, though the key consideration in the next 6 months will be whether energy prices in particular stabilise or continue to rise."
Nicholas Frappell, ABC Refinery (Increase): "The RBA is still in inflation-taming mode."
Brian Parker, Australian Retirement Trust (Increase): "The RBA has more to do, but we're close to the peak given that inflation is likely to fall over the coming year."
Peter Munckton, Bank of Queensland (Increase): "The economy is in good shape and inflation remains too high."
Cameron Kusher, REA Group (Increase): "The RBA have reiterated that although the pace of rate hikes slowed in October, inflation remains too high and interest rates will need to be increased."
David Robertson, Bendigo Bank (Increase): "The RBA are still on their path to a 'neutral' cash rate of just above 3% but now sensibly are progressing in 0.25% increments. The next increase on Melbourne Cup day will take the cash rate up to 2.85%, before a likely pause until February 2023 when the rate will reach 3.1%."
Tim Nelson, Griffith University (Hold): "RBA still concerned about inflation."
Noel Whittaker, QUT (Increase): "They have made no secret of the fact they will increase range till they reach with their regards normal – which I think will be around 4%."
Stella Huangfu, University of Sydney (Increase): "CPI inflation has dropped from 7% (in the year to July) to 6.8% (in the year to August). Although it is still way above the reserve bank's 2–3 inflation target, apparently inflation has started easing."
Nalini Prasad, UNSW Sydney (Increase): "Inflation remains well above the RBA's target range. Inflationary pressures remain a concern across a number of countries globally. In addition, the labour market in Australia is also tight. In real terms interest rates in Australia are still negative. The RBA will need to raise interest rates into the future to reduce inflationary pressures and move the real interest rates into positive territory."
Jeffrey Sheen, Macquarie University (Increase): "To ensure the re-anchoring of inflation expectations."
Dale Gillham, Wealth Within (Increase): "The RBA is still predicting inflation to rise slightly into the end of the year. So far it has not reached its target figure for interest rates to curb this highly inflationary environment. I would expect more rate rises over the coming months."
Stephen Halmarick, Commonwealth Bank (Increase): "To combat high inflation."
Geoffrey Harold Kingston, Macquarie Business School (Increase): "Economy is still running too hot."
Jakob B Madsen, University of Western Australia (Increase): "Inflation concerns."
Jason Azzopardi, Resimac (Increase): "Inflation reduction requires significantly more monetary policy tightening."
Stephen Miller, GSFM (Increase): "Inflation will be more intractable than the RBA and markets are currently contemplating."
Mark Brimble, Griffith Uni (Increase): "With inflation stubborn, the RBA is likely to want to contract monetary policy further, moving in smaller increments given rising energy prices and slowly fiscal stimulus from Government."
Michael Yardney, Metropole Property Strategists (Increase): "The current cash rate is close to neutral, not that the RBA really knows what the neutral level is (yet) and the Bank still needs to slow inflation by racing rates and dampening demand."