With inflation above a key target increased the potential for an initial interest rate hike—which could pay typical borrowers $500 more per month in repayment.
The Australian Bureau of Statistics revealed on Tuesday that the Consumer Price Index climbed 3.5 per cent in December over the year.
While this is only half of the US inflation rate of 7 per cent, which is itself a four-decade high, it was well above the Reserve Bank of Australia’s target of 2 to 3 per cent.
In 2020, headline inflation rose just 0.9 percent, but last year the CPI nearly quadrupled.
Westpac, Australia’s second largest bank, is now forecasting six RBA rate hikes within the next two years, which would see a typical borrower pay $500 more per month in repayment in early 2024.
With inflation above a key target increased the potential for an initial interest rate hike—which could pay typical borrowers $500 more per month in repayment. The Australian Bureau of Statistics revealed on Tuesday that the Consumer Price Index climbed 3.5 percent year over year in December (pictured is an auction at Hurlston Park in Sydney’s inner west)
In a sign of more pain for Australian consumers, transport costs rose 12.5 percent in 2021, figures taken as diesel motorists before Christmas need the AdBlue additive to introduce modern trucks, utes and four-wheel drive struggle to find it.
Housing costs rose 4 per cent last year, with rental markets outside Sydney, Melbourne and Brisbane having vacancy rates of less than one per cent.
The underlying measure of inflation, set aside larger price movements, was also on the higher side of the RBA’s 2 to 3 per cent target.
The weighted mean measure of inflation based on consumer goods rose 2.7 percent in the middle of the price change chart.
Westpac now expects the Reserve Bank of Australia to raise the cash rate from a record-low of 0.1 percent to 1.75 percent in early 2024.
The bank’s chief economist Bill Evans has forecast six interest rate hikes in August 2022, October 2022, March 2023, June 2023, December 2023 and March 2024.
This is despite Reserve Bank Governor Philip Lowe’s repeatedly promising through most of 2021 that rates will not be raised until 2024 at the ‘earliest’.
Westpac, Australia’s second largest bank, is now forecasting six RBA rate hikes within the next two years, which would see a typical borrower pay $500 more per month in repayment by the beginning of 2024 (pictured of the City of Sydney). There is a branch in the center)
In a sign of further pain for Australian consumers, transport costs rose 12.5 percent in 2021, with figures taken as diesel motorists to introduce modern trucks, utes and four-wheel drive before Christmas Struggled to find the necessary AdBlue additive (pictured is a COVID testing center in Bondi, east of Sydney)
It would also mark the first official rate hike since November 2010, immediately after the global financial crisis.
If Westpac’s forecast turns out to be true, the person paying off a typical Australian home would pay an additional $513 per month in mortgage repayment.
In 2021, the average price of homes and apartments together rose 22.1 percent to $709,803, with CoreLogic data showing the fastest calendar year growth since 1989.
With a 20 percent deposit, a borrower buying a mid-value home in Australia would owe the bank $567,842.
The borrower from Commonwealth Bank, Australia’s largest domestic lender, will now pay $2,212 per month with a 2.39 percent variable rate.
If that rate rises to 1.65 percent to 4.04 percent, the repayment would increase by $513 per month to $2,725.
It is also believed that banks do not increase their variable mortgage rates ahead of the move in the Reserve Bank cash rate.
That’s more than a decade away from guarantees with banks blaming global financing costs for raising their rates by a huge margin.
Westpac now expects the Reserve Bank of Australia to raise the cash rate from a record-low 0.1 percent to 1.75 percent by early 2024.
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