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RBA’S BRUTAL MOVE: Interest rates hiked again as Aussies struggle

Updated: May 29

Homeowners have been on a knife edge and now the Reserve Bank has made its latest shock decision on interest rate hikes.

Australians will have more financial pain inflicted on them as the Reserve Bank of Australia decided to lift rates by 0.25 per cent to 3.85 per cent.

This brings interest rates to its highest level since April 2012.

Homeowners have been on a knife edge to see whether they would be forced to fork out more money following one of the most aggressive rate hike cycles from the Reserve Bank of Australia in recent times. Last month, the RBA chose to pause its interest rate increases, which have skyrocketed from 0.1 per cent since last May.

Now Aussies have been slapped with their eleventh rate hike in the space of just 12 months.

This means those with the average loan size of $586,000 will be forking out around $14,000 more annually compared to what they were paying this time last year. Pradeep Philip, head of Deloitte Access Economics, said the rate increase showed that the RBA is still playing “recession roulette”, despite briefly walking away from the table when it paused rate hikes last month. “The decision to lift the cash rate by 25 basis points to 3.85 per cent is unnecessary given 10 previous rate hikes are still working their way through the economy,” he explained. “Meanwhile, hundreds of thousands of mortgage holders are still to see their repayments surge as pandemic-era low fixed rates revert to variable, while businesses continue to be squeezed.

“Last week’s CPI data showed that inflation is clearly slowing, and the fact it is doing so while unemployment remains at record lows is a good thing.”

He said the RBA’s own statement note that despite record low unemployment, wage growth has not spiralled and is still consistent with the inflation target. “With the recent independent review into the RBA reminding Australians that full employment sits alongside price stability in the bank’s mandate, it is important that the RBA exercises caution on rate rises until it has seen the impact of the last 10 fully pass through the economy,” he said. More than two in five Australians said their rent or mortgage was one of their most stressful expenses in April – the highest level since Finder’s Consumer Sentiment Tracker started in May 2019. Graham Cooke, head of consumer research at Finder, said the rate rise would be a heavy blow for many.

“The market consensus is that we are now at the peak of a frenzied, steep climb. The question yet to be answered is how well Aussie homeowners will be able to breathe in the thin air,” he said.

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