Mortgage holders across the country are bracing for a record high in repayments after the Reserve Bank of Australia (RBA) all but locked in another interest rate rise for March.
On Tuesday, the Reserve Bank of Australia (RBA) declared a 25 basis point increase in the official cash rate (which serves as a reference for lenders’ interest rates) to 3.35 percent. This decision was made based on the minutes from the RBA’s February meeting.
The decision to raise the official cash rate by the RBA means that mortgage holders across the country will now have to pay more for their mortgages. It also means that lenders, such as banks and other financial institutions, will be able to increase the interest rates they charge on their home loans. This could lead to a situation where mortgage holders are paying record high levels of interest on their home loans.
For many people, the prospect of increased mortgage repayments is a source of financial stress. With wages stagnant and household budgets already stretched, the extra cost of a mortgage repayment could have a significant impact on household finances.
At the conclusion of their deliberations, the minutes revealed that the central bank had decided to go with a 25 basis point increase, asserting that given the nine consecutive hikes already in place, there was less of a need for the more significant 50 basis point rise.
At the meeting, it was noted that households with variable rate loans were likely to hit record highs, however, it was also suggested that the savings acquired during the pandemic could provide enough cushion to keep them afloat.
“The interest rates on variable rate home loans had drastically increased in the preceding months, leading to an expected highest ever mortgage payment as a proportion of disposable household income,” the minutes said.
In a bid to curb the rapid inflation of 7.8 percent, which was the highest rate in Australia since 1990, the Reserve Bank of Australia (RBA) has taken the same drastic action as other central banks worldwide and increased its rates.
