Homeowners told to brace for third consecutive 50 basis point cash rate increase

A day after interest rates were increased for a third straight month, millions of home owners have been warned about a triple whammy.

Homeowners have been warned to brace for a triple whammy of a third 0.5 percentage point increase in the cash rate next month amid looming price hikes for petrol, fruit and vegetables.

If the predictions are correct, the move would lift the official interest rate from its current level of 1.35 per cent up to 1.85 per cent, in the most aggressive round of interest rate hikes since the 1990s.

Since the RBA started lifting rates in May, the cumulative increase in repayments on an $400,000 mortgage is now $275 a month or $550 for an $800,000 mortgage.

Treasurer Jim Chalmers warned mortgage holders to expect further rate hikes as the Reserve Bank tries to get spiralling inflation under control.

“Look, we don’t pre-empt decisions of the independent Reserve Bank, but the governor has made it clear … that there will be more interest rate rises to come,’’ Dr Chalmers said.

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Homeowners have been warned that interest rate hikes could continue. Picture: Steve Pohlner

“And that’s because this inflation challenge in our economy will get harder before it gets easier.”

The Albanese Government has warned families grappling with rising costs that petrol prices will rise in September with no plans to extend the temporary fuel excise cut.

“We’ve tried to be upfront with people and say they shouldn’t expect that petrol price relief to continue forever,’’ the Treasurer said.

Groceries are also expected to rise further as a result of the current flood disaster in NSW. Prices have already been increasing in the wake of February’s floods in Queensland and NSW.

“Our expectation is that these floods will make the costs of some essentials, some fruit and vegetables even more expensive at a time when the prices for those essentials are already skyrocketing,’’ Dr Chalmers said.

“And so that will make vegetables and fruit more expensive at a time when they’re already expensive enough.”

Tuesday’s increase of the official cash rate up to 1.35 per cent is the third consecutive month the rate has been raised and the second consecutive month it has increased by 50 basis points.

May’s increase was the first time the Reserve Bank had hiked rates in 11 years.

Mortgage holders were told to expect further rate hikes. Picture: Brendon Thorne/Getty Images

RBA governor Philip Lowe said Australians should expect more interest rate rises to come.

“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic,” he said in a statement following Tuesday’s RBA meeting.

And while some analysts are predicting a 25 basis point increase in August, others are suggesting a third consecutive month of 0.5 per cent hikes.

In some good news however, the Treasurer does not believe a recession is likely.

“Neither the Treasury nor the Reserve Bank is forecasting a recession in Australia,’’ Dr Chalmers said.

“The way I look at it, is that our economy is growing but so are our challenges. I am confident in the long-term prospects for the Australian economy so long as we do our best to manage together this difficult combination of circumstances that we’re dealing with now.”

Originally published as Homeowners told to brace for third consecutive 50 basis point cash rate increase