Australia’s largest Bank Commonwealth Bank (CBA) has predicted a shocking rise in interest rates, making households worry about the expenses.
On Tuesday, RBA confirmed the need for higher interest rates in the country to tackle the soaring inflation and unemployment rate.
Reserve Bank of Australia (RBA) Governor Philip Lowe affirmed the need for rising interest rates at Tuesday’s meeting and discussed on a continuous rise in unemployment in the country amid rising covid cases.
Following the RBA’s announcement, experts from CBA predicted continuous 50bp increases in August and September, before a pause in October and a further rise of 25bp in November, taking the cash rate to almost 2.60 per cent.
Notably, the current interest rate stands at 1.35 per cent.
RBA Deputy Governor Michelle Bullock threw light on the possible impact of 300 basis point lift to the variable mortgage rate, reflecting changes already underway in the market and by the RBA.
The analysis based on the prediction, that interest rates will go up by 3 per cent, revealed just under 30 per cent of variable-rate borrowers would struggle to make repayments and could potentially face increases of more than 40 per cent of their current amount.
“Borrowers with fixed-rate loans that are due to expire by the end of 2023 would experience a median increase of around $650 (or 45 per cent) in their monthly repayments,” Ms. Bullock said.
“This is slightly more than the rise in payments that variable-rate borrowers would experience over this time.”
The interest rates will continue to rise in the country and possibly will hit an all-time high by the end of the year, while RBA would monitor the situation of how households cope with the rising cash rate in the country and react to the soaring inflation and the cost of living pressures.
