Hotter-than-anticipated inflation data may have slashed homeowners’ odds of a rate cut this year, according to Compare the Market Economic Director David Koch.
But homeowners continue to cross their fingers for some early relief. Compare the Market found a 0.25% rate cut alone could cut monthly repayments on a $600,000 by just under $100.
Mr Koch said even a small change could help take huge pressure off household budgets, but sticky inflation could lead to bigger problems if left to run rampant.
“Australian consumers are doing the right thing in the battle against inflation,” Mr Koch said.
“They have been asked to tighten their belts and they are doing exactly that.
“If you exclude the COVID period, retail sales are growing at the weakest pace on record.
“And it looks set to stay that way: very weak consumer sentiment figures show shoppers are very concerned about the impact of high inflation and higher-for-longer interest rates.
“But despite their efforts, inflation is proving stickier than expected and that means homeowners really can’t bank on interest rates coming down any time soon”.
Top pundits remain split on when and if rates will come down in 2024, with Judo Bank’s Warren Hogan even forecasting several hikes before the year’s close.
Mr Koch said other leading economists had revised their predictions in light of the latest data, with Westpac moving its tip for the first cut from September, back to November.
| Mortgage size | If a 0.25% rate cut were to occur | ||
| Minimum monthly repayments on variable P&I rate of 6.40% | Minimum monthly repayments on variable P&I rate of 6.15% | Difference in monthly minimum repayments | |
| $500,000 | $3,127.00 | $3,046.00 | $81.00 |
| $600,000 | $3,753.00 | $3,655.00 | $98.00 |
| $750,000 | $4,691.00 | $4,569.00 | $122.00 |
| $900,000 | $5,629.00 | $5,483.00 | $146.00 |
| $1,000,000 | $6,255.00 | $6,092.00 | $163.00 |
| Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.40% compared to 6.15% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees. | |||
On the other hand, if a 0.75% increase were to occur, in line with Mr Hogan’s predictions, someone with a $600,000 loan might have to fork out nearly $300 more in monthly repayments.
| Mortgage size | If three x 0.25% rate hikes were to occur | ||
| Minimum monthly repayments on variable P&I rate of 6.4% | Minimum monthly repayments on variable P&I rate of 7.15% | Difference in monthly minimum repayments | |
| $500,000 | $3128 | $3377 | $250 |
| $600,000 | $3753 | $4052 | $299 |
| $750,000 | $4691 | $5066 | $374 |
| $900,000 | $5630 | $6079 | $449 |
| $1,000,000 | $6255 | $6754 | $499 |
| Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.4% and 7.15% principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees. Average taken from RBA report on Housing Lending Rates. | |||
Mr Koch encouraged homeowners to be sceptical of their current interest rate and to use websites like Compare the Market to make sure it’s competitive.
“The message is clear: don’t wait for the RBA to move on rates,” Mr Koch said.
“Start comparing home loans now and see if you can create your own rate cut by switching to a better offer”.
For more information, please contact:
Natasha Innes | 0416 705 514 | natasha.innes@
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