Just in case we needed another impediment to a rise in the ASX,...

Just in case we needed another impediment to a rise in the ASX, it looks like we may get another interest rise tomorrow.

Mortgage bills to rise as RBA mulls interest rates hike: economists (thenewdaily.com.au)

Christmas mortgage squeeze looms as RBA preparesfresh interest rates hike: Economists

Australians are being told to brace for another painful mortgage billsqueeze this week, with economists tipping a fresh hike in interest rates whenthe Reserve Bank meets for November.

More than two-thirds (69 per cent) of experts surveyed by Finder expectthe RBA will move its cash rate target from 4.1 per cent to 4.35 per cent onTuesday, which would add about $79 to monthly repayments on a typical $500,000,25-year home loan, according to RateCity figures.

It would be the first rate increase since June, when central bankerspaused to consider whether inflation was easing fast enough to reach the RBA’s2 to 3 per cent target band by late 2025.

Much has changed in the past week, though, with higher-than-expectedunderlying inflation over the September quarter and a bump in retail salestesting the patience of the RBA board.

Oxford Australia head of macroeconomic forecasting Sean Langcake saidthe RBA’s forecasts for inflation in 2023 have been “blown out of the water”,which should trigger a November hike.

“There’s probably more bite than bark in that ‘lower tolerance’ guidance[from the October RBA meeting minutes,” he said.

“At this point, it’s going to look very odd if they don’t hike.”

Commonwealth Bank chief economist Gareth Aird also expects a hikepointing to a declaration from RBA boss Michele Bullock that the RBA wouldn’thesitate to respond if inflation came in too high.

“A November rate hike would marry up with the RBA’s rhetoric that itwill do what is necessary to return inflation to target within a reasonabletime frame,” he said.

Christmas mortgage squeeze looms

It raises the prospect of a fresh squeeze for millions of mortgageholders before Christmas, with more than $1100 having already been added tomonthly repayments on a typical mortgage since May 2022 (when the Reserve Bankbegan increasing rates from pandemic-era lows).

As things stand, rates of mortgage stress have already soared to recordhighs, according to data consultancy Roy Morgan, while prices for essentialssuch as power and petrol continue to rise.

Impact Economics lead economist Angela Jackson said the latest figuresshowed a need to slow the economy further to bring down inflation, though sucha move also comes with risks.

“This needs to be weighed against the current per capita recession andthe risks of higher unemployment,” Jackson said.

Multiple rate hikes to come

The RBA will also publish updated economic forecasts next week that willprovide additional insight into the path for interest rates beyond November.

Economists are expecting there may be a slight upwards revision toinflation predictions on the back of the September-quarter data.

Langcake said if the RBA does opt to hike rates in November there willmost likely be another increase on the way in December.

“One brings two,” he said.

That would mean the spectre of even higher mortgage repayments will hangover home owners during the Christmas holidays, though actual bill increasesfrom the rises would take months.

University of Sydney professor James Morley said the prospect of higherinterest rates reflected the RBA’s focus on ensuring inflation expectationsremain “anchored at low levels”.

He said the risk of a recession is now “receding”, which gives centralbankers room to again raise rates without an unacceptable risk that the economywill be pushed into a downturn.

“I suspect thatdomestic components of inflation will make more progress back towards targetbefore the February meeting and then the RBA will hold unless there are furtherdomestic or global shock,” he said.

Christmas mortgage squeeze looms as RBA preparesfresh interest rates hike: Economists

Australians are being told to brace for another painful mortgage billsqueeze this week, with economists tipping a fresh hike in interest rates whenthe Reserve Bank meets for November.

More than two-thirds (69 per cent) of experts surveyed by Finder expectthe RBA will move its cash rate target from 4.1 per cent to 4.35 per cent onTuesday, which would add about $79 to monthly repayments on a typical $500,000,25-year home loan, according to RateCity figures.

It would be the first rate increase since June, when central bankerspaused to consider whether inflation was easing fast enough to reach the RBA’s2 to 3 per cent target band by late 2025.

Much has changed in the past week, though, with higher-than-expectedunderlying inflation over the September quarter and a bump in retail salestesting the patience of the RBA board.

Oxford Australia head of macroeconomic forecasting Sean Langcake saidthe RBA’s forecasts for inflation in 2023 have been “blown out of the water”,which should trigger a November hike.

“There’s probably more bite than bark in that ‘lower tolerance’ guidance[from the October RBA meeting minutes,” he said.

“At this point, it’s going to look very odd if they don’t hike.”

Commonwealth Bank chief economist Gareth Aird also expects a hikepointing to a declaration from RBA boss Michele Bullock that the RBA wouldn’thesitate to respond if inflation came in too high.

“A November rate hike would marry up with the RBA’s rhetoric that itwill do what is necessary to return inflation to target within a reasonabletime frame,” he said.

Christmas mortgage squeeze looms

It raises the prospect of a fresh squeeze for millions of mortgageholders before Christmas, with more than $1100 having already been added tomonthly repayments on a typical mortgage since May 2022 (when the Reserve Bankbegan increasing rates from pandemic-era lows).

As things stand, rates of mortgage stress have already soared to recordhighs, according to data consultancy Roy Morgan, while prices for essentialssuch as power and petrol continue to rise.

Impact Economics lead economist Angela Jackson said the latest figuresshowed a need to slow the economy further to bring down inflation, though sucha move also comes with risks.

“This needs to be weighed against the current per capita recession andthe risks of higher unemployment,” Jackson said.

Multiple rate hikes to come

The RBA will also publish updated economic forecasts next week that willprovide additional insight into the path for interest rates beyond November.

Economists are expecting there may be a slight upwards revision toinflation predictions on the back of the September-quarter data.

Langcake said if the RBA does opt to hike rates in November there willmost likely be another increase on the way in December.

“One brings two,” he said.

That would mean the spectre of even higher mortgage repayments will hangover home owners during the Christmas holidays, though actual bill increasesfrom the rises would take months.

University of Sydney professor James Morley said the prospect of higherinterest rates reflected the RBA’s focus on ensuring inflation expectationsremain “anchored at low levels”.

He said the risk of a recession is now “receding”, which gives centralbankers room to again raise rates without an unacceptable risk that the economywill be pushed into a downturn.

“I suspect thatdomestic components of inflation will make more progress back towards targetbefore the February meeting and then the RBA will hold unless there are furtherdomestic or global shock,” he said.