The RBA Just Hiked Again. How Much More Can Mortgage Holders Take?

Well, that's exactly what they said.

I think ANZ are predicting it.

The other banks are putting it on hold, but I think we'll have to wait until tomorrow when they release the CPI or the September quarter details.

Yeah.

Well, it's funny.

They've included in their decision paragraph at the end here, the board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed.

I feel like when you've got one tool, which is raise interest rates, you've only got one solution, which is raise interest rates.

That's the only thing the RBA can do.

So we've got the problem where inflation is outside the target band, 2% to 3%.

Now about two weeks ago there was the unemployment data came in and that was getting worse than what was expected.

So a lot of people revised their expectation that the RBA would increase the interest rate and they said they'll probably defer the increase to Melbourne Cup because they're worried about unemployment rising.

But, you know, I said on my podcast last week, I don't think it's going to change anything because the RBA pretty much discount every other metric outside of inflation.

Like even in this statement, they've led with inflation remains elevated.

And it says further down they're committed to bring inflation back under 3%.

So it's almost a no-brainer for me.

Whenever inflation is over 3%, it's going to be very rare they're not going to move upwards.

What do you think your clients are going to be feeling about this move?

I think a lot of them are going to look at remortgaging their homes for an extended period, not to get a better interest rate because you're not going to get that, but if they've got a 20-year loan at the moment, they might go back to a 30 or 40-year, which is going to cost them money in the long term, but it will help minimise the payments up front and help them get through the next few years.

Yeah, that's fair enough.

So, you know, obviously that's going to extend the term of the loan but it's going to give them like cash flow reprieve now.

If they do that, it almost defeats the purpose, doesn't it? Because now they've got excess funds which they can use spending which will then re-contribute to inflation.

Yeah, I think that will just help them survive though because they're already struggling.

So the interest rates are going to change.

I think on a $600,000 loan it's going to bring your repayments up by $80 a month or something like that.

So I think it's just going to be something that they're going to need to do to keep moving with their home loan.