Family’s worry as Reserve Bank of Australia tipped to increase interest rates again

Families struggling with cost of living pressures are fearing another interest rate hike when the Reserve Bank of Australia meets on Tuesday.

Like many families across Australia, Bryan and Nicola Alexander are nervous about cost of living pressures and how hard rising interest rates will hit them.

The Perth couple work alternate weekend days to pay their bills and feed their three children, aged between eight and 14.

“I work Saturdays and he works Sundays … we sacrifice quality time with the family to manage,” Ms Alexander told NCA NewsWire.

Until recently, the family had a home loan with Keystart, with their lowest interest rate of 4.36 per cent.

Keystart is the West Australian government’s lending provider that offers low-deposit home loans to those unable to meet the deposit requirements of mainstream lenders.

“We had a shared equity loan where Keystart owned 20 per cent of our property, so realistically our loan repayments were based on 80 per cent,” Ms Alexander said.

Nicola and Bryan Alexander are among many Australians struggling with cost of living pressures.

The pair never struggled to make repayments, but as rates began to climb this year they realised they needed to reassess their situation.

“With the help of a broker – and a few interest rate hikes later – we consolidated all of our debt,” she said.

“We now own 100 per cent and we are about $900 a month better off overall.”

Ms Alexander said inflation and cost of living were going up, but their income effectively remained the same, so the family worried about their finances.

“Our budget has not changed for things like groceries, as we just buy less overall,” she said.

“Insurances, rates and utilities have spiked massively, and most months we do have to request payment extensions.

“Overall, I feel we’re pretty lucky. We have always budgeted well from a young age and live within our means.

“But if the cost of living continues to go up at the rate they are, we may have some big adjustments to make.”

Interest rates are expected to rise by 0.5 per cent. Picture: iStock image

So what will the Reserve Bank of Australia do when it meets on Tuesday?

The RBA is tipped to increase interest rates by 0.5 per cent, with a fifth consecutive increase that would put the cash rate at 2.35 per cent.

All of the big four banks – ANZ, the Commonwealth Bank of Australia, NAB and Westpac – are predicting the RBA will hike rates by 0.5 per cent.

CBM Mortgages director Craig McDonald told NCA NewsWire that many economists were in predicting the cash rate to go as high as 3.50 per cent from its current 1.85 per cent rate over the next six months.

“We have obviously had a couple of 0.5 per cent increases the past two months and I think it will increase by 0.5 per cent again in September, with smaller 0.25 per cent increments in the later months before 2023,” he said.

Rate City research director Sally Tindall said if the RBA pushed ahead with another double hike on Tuesday, the cash rate would hit the highest level since December 2014.

“If this happens, the average owner-occupier with a variable mortgage could be paying an interest rate that’s over five per cent,” she said.

“As a result, the average borrower would see their monthly repayments increase, in total, by more than $600. That’s a huge amount of extra money to stump up month after month.”

Originally published as Family’s worry as Reserve Bank of Australia tipped to increase interest rates again