Sunday, 04 Dec 2022

Rate rise expected on Melbourne Cup day likely to be followed by higher inflation outlook

Rate rise expected on Melbourne Cup day likely to be followed by higher inflation outlook


Rate rise expected on Melbourne Cup day likely to be followed by higher inflation outlook

The Reserve Bank will likely deliver a double dose of bad news next week with a seventh consecutive increase in its key interest rate and an elevated forecast for how high inflation will go before peaking.

Such an increase would add about $30 more in monthly mortgage repayments for each $100,000 borrowed, assuming lenders passed on such an increase, RateCity said.

The other dose of bad news from the central bank may land next Friday when the RBA updates its quarterly statement on monetary policy. In August, the bank predicted the inflation rate would peak in the December quarter at 7.75%, a figure the federal budget used for its modelling.

A 50-basis point rise on Tuesday would translate into a cumulative $874 more a month in mortgage repayments for those on a typical $500,000 loan since the RBA hikes began in May, RateCity said. If the RBA increases reach 3.85%, those on such loans would be paying just over $1,050 more each month on their mortgages.

Research by NAB, however, indicates that despite the expectation of further interest rate rises and the much-publicised prospect of falling home prices, the number of Australians who think now is a good time to buy a home is actually rising.

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