Opinion: Knowing another rate rise is coming won’t make it any less painful for borrowers struggling to keep up with interest payments
Ten for ten. That’s what the interest rate score will show on Tuesday if, as expected, the Reserve Bank delivers its monetary policy decision lifting rates by another quarter of a percentage point.
The full impact of the rate hikes takes a while to filter through, with a lag between banks announcing rate increases and borrowers having to pay them. And for those borrowers on the ultra-cheap fixed rate packages, the higher rates won’t start hurting until these packages come to an end. The trouble for the RBA is that it only has one type of medicine – and all it can do is alter the dosage rather than tailor the amount for particular cohorts – like high-income earners or struggling first home buyers.
Both will be carefully reading the statement issued by the RBA for any signs of when it might put its foot on the interest rate brake, whether the central bank refers to future rate increase in singular or plural or whether it says future movements will be determined by economic data.Westpac chief economist Bill Evans.
Meanwhile, UBS says the rate hikes are now starting to really affect areas like the property market. In a note to investors on Monday it pointed to “clear evidence of a very sharp correction underway in the housing market”.
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