Finder’s RBA survey: 97% of experts predict another cash rate rise
Aussie homeowners are in for little relief with yet another cash rate hike expected in November, according to new research from Finder.
In this month's Finder RBA Cash Rate Surveyâ„¢, 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) believe the cash rate will change on Tuesday, with the majority (92%, 35/39) forecasting another increase of 25 basis points – bringing the cash rate to 2.85% in November.
While almost half of experts (49%, 19/38) agree with RBA's expected increase of 25 basis points, 1 in 5 (21%, 8/38) disagree with any increase and say the RBA should instead hold the cash rate.
Graham Cooke, head of consumer research at Finder, said a seventh consecutive rate hike – 275 basis points in total – will be a tough burden for many households.
"The current series of rate hikes has added almost $9,000 to the annual cost of a $500K mortgage.
"Another 25-basis-point hike will push that cost up to near $10,000.
"The RBA has been crystal-clear that its top priority is to tamp down inflation. After 6 hikes, inflation is at a 30-year high. More rate rises are likely on the way."
Leanne Pilkington from Laing+Simmons said the rate will rise before the horses run at the Melbourne Cup.
"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."
| Cash rate | Average home loan rate* | Average monthly repayment | Average monthly increase | Average annual repayment | Average annual increase | |
|---|---|---|---|---|---|---|
| April 2022 | 0.10% | 3.45% | $2,231 | $26,772 | ||
| October (current rate) | 2.60% | 5.95%** | $2,966 | $735 | $35,592 | $8,820 |
| November (25bp rate rise applied) | 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 |
Homeowners already on shaky ground
The predicted interest rate rise could spell disaster for millions of homeowners.
Almost three-quarters of Australians (70%) say they couldn't afford their mortgage repayments if there was another rate hike before Christmas.
That's the equivalent of 4.1 million households who would have to make changes to their finances with just one more rate rise.
Worryingly, 9% (roughly 500,000 people) say they'd have to sell their property if hit with another hike.
A further 3% admit they would default on their mortgage if their interest rate went up any higher.
Cooke said rapidly increasing interest rates will have dire consequences for Aussie households.
"The prospect of one more interest rate spike is just too much to manage for millions of households causing many to go to extreme lengths.
"Remember it's not too late to find a better home loan deal. The best rates on the market now start with a '4' rather than a '1'.
"Refinancing can dramatically lower your costs – mortgage holders could save thousands of dollars a year."
| Home loan interest rates have risen significantly in 2022. If they rise again before Christmas, how will this impact you? | |
|---|---|
| No impact | 30% |
| I will have to spend less in other areas | 45% |
| I will have to sell my property | 9% |
| I will have to downsize my property | 7% |
| I will have to refinance to afford repayments | 7% |
| I will default on my mortgage | 3% |
| Source: Finder survey of 302 respondents with a home loan, October 2022 |
House prices tipped to drop up to $175,000 in capital cities
The majority of panellists who weighed in* predict a price drop for houses across all capital cities.
Sydney is projected to suffer the biggest drop of 13.4% from its peak, a loss of $174,200 off the median property.
Melbourne is not far behind, with experts predicting a 12.9% drop for a loss of $116,100 in value.
Cooke said he thinks the panel's predictions for house price drops in Sydney are actually optimistic.
"We've already seen more than 10% wiped from housing values in some areas since the peak, and the cash rate will just keep climbing.
"It's a worse-case scenario, but price falls of up to 25% would not be unrealistic."
Houses in Hobart and Canberra are tipped to lose 9.8% and 9.5%, while the other capital cities are looking at drops between 9% and 9.4%.
"If lessons are to be learned from similar price falls in places like Ireland post GFC, the outer suburbs and apartments will be the hardest hit, and the slowest to recover," Cooke said.
How far will house prices fall from peak before rebounding?
| City | Median sales price last 3 months | Average drop from peak predicted | Expected loss in value | Expected median price after drop |
|---|---|---|---|---|
| Sydney | $1,300,000 | -13.40% | -$174,200 | $1,125,800 |
| Melbourne | $900,000 | -12.90% | -$116,100 | $783,900 |
| Hobart | $755,000 | -9.80% | -$73,990 | $681,010 |
| Canberra | $968,000 | -9.50% | -$91,960 | $876,040 |
| Brisbane | $760,000 | -9.40% | -$71,440 | $688,560 |
| Perth | $550,000 | -9.40% | -$51,700 | $498,300 |
| Adelaide | $670,000 | -9.00% | -$60,300 | $609,700 |
| Darwin | $585,000 | -9.00% | -$52,650 | $532,350 |
| Source: Finder RBA Cash Rate Survey October 2022, Corelogic |
*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."
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."
