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RBA Rates Update Feb 23

07.02.23 | Marc Barlow | Reserve Bank Announcements

New year, new RBA rate rise


The RBA has started 2023 as it ended last year by hiking the cash rate again, increasing it from 3.10% to 3.35% today.


A rise of 0.25% was delivered by Australia’s Central Bank following its first monetary meeting of 2023 this afternoon.


The hike makes it nine rises in a row since the RBA began applying brakes to spending in May last year.


And it’s in response to continuing high inflation:


‘In Australia, CPI inflation over the year to the December quarter was 7.8 per cent, the highest since 1990.


‘In underlying terms, inflation was 6.9 per cent, which was higher than expected. Global factors explain much of this high inflation, but strong domestic demand is adding to the inflationary pressures,’ the RBA said today.


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


‘Some households have substantial savings buffers, but others are experiencing a painful squeeze on their budgets.’


They are right about a ‘painful squeeze’! 2023 is likely to be another difficult year for many Australians with a home loan.


Rates aren’t likely to fall significantly (in the short term at least), so the pain of soaring living costs will continue to bite.


The “r” word (recession) is also being bandied about by some economic analysts. One of the factors fuelling this concern is the so-called “Mortgage Cliff”.


Around 3.3 million Australian households (approximately 35% of the market), have a mortgage, according to government figures. And, at least $275 billion worth of fixed-rate loans with the big four banks will come to an end between July and December this year.


In other words, your budget-friendly, low, fixed loan repayments set before and during the pandemic could jump up hugely once it expires.


Sound familiar? It’s what triggered the US sub-prime crash in 2008, causing a global financial crisis. So, mid year could see some real pain for those with a home loan as repayments rocket up on money borrowed. In fact, trouble has been brewing since last year. 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.


And, of course, the cost of living shows no sign of slowing as the RBA continues to use monetary levers to rein in galloping inflation.


The RBA added an optimistic note to its rate rise announcement, saying ‘Inflation is expected to decline this year due to both global factors and slower growth in domestic demand.


‘The Board is seeking to return inflation to the 2–3 per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.’


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).