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RBA Rates Update Dec 22

06.12.22 | Marc Barlow | Reserve Bank Announcements

RBA delivers Christmas rate rise


The RBA lifted the official cash rate just weeks before the festive season, increasing it to 3.10% today.


The RBA’s final monthly board meeting of 2022 has resulted in an eighth consecutive rate hike, this time a 0.25% rise.


Despite inflation easing slightly, Australia’s Central Bank isn’t taking its foot off the monetary policy accelerator as it warns of inflation increasing.


‘Inflation in Australia is too high, at 6.9 per cent over the year to October,’ said the RBA today.


‘Inflation is forecast to peak at around 8 per cent over the year to the December quarter.’


The Bank’s forecast is for CPI inflation to decline over the next couple of years to be ‘a little above 3% over 2024’.


‘High inflation damages our economy,’ explained the RBA, ‘and makes life more difficult for people. The Board’s priority is to re-establish low inflation and return inflation to the 2–3 per cent range over time.’


So the fight against inflation will go on for at least another year or two.


As the RBA noted, inflation dropped slightly in November, with the consumer price index (CPI) up 6.9% in the year to October — a drop from the 7.3% rise in the 12 months to September.


That’s the good (ish) news. The bad news?


Around 35%, or 3.3 million Australian households, have a mortgage, according to government figures. And a third of them are fixed or have a fixed component.


And at least $275 billion worth of fixed-rate loans with the big four banks will come to an end between July and next December.


Which means 2023 could be the bearer of more financial pain for many households.


To contextualise this, as of October, almost 14.4% of mortgage borrowers (619,000) were considered extremely at risk of mortgage stress, according to research by Roy Morgan.


The RBA added that monetary policy operates with a lag and ‘that the full effect of the increase in interest rates is yet to be felt in mortgage payments.’


How times have changed. A year ago, there was no pre-Santa shock as the official cash rate remained at an historic-low of 0.1%.


At the time, RBA Governor Phillip Lowe explained that the forecasts ‘do not warrant an increase in the cash rate in 2022’.


Well, that didn’t materialise. In fact, last year the RBA had forecast rates would remain low until 2024.


No wonder Lowe issued an apology last month to those who borrowed based on that advice, saying it was “regrettable that Australians listened to what we said”.


It’s been a challenging 2022 for many Australian households, particularly those with home loans.


Repayments have increased rapidly while costs of living have surged. Banks and lenders have largely passed on the increases, too.


At least there won’t be another official cash rate rise next month. The RBA doesn’t meet in January, locking in this rate while Australia enjoys some summer sun.


The RBA meets again on February 7, 2023.


If rate hikes have you concerned, contact Mortgage Broker Group.


We can help with tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household prices.


Mortgage Broker Group operates nation-wide and our service is 100% free to you (lender fees and charges may apply).


Finally, we would like to wish all our valued clients a joyous festive season and a safe and happy new year.