Interest rates: Warning of three more rate hikes to hit Australians

Australians are already running into financial difficulty with nine straight rate rises but now there are predictions they could go a lot higher.

Interest rates have hit their highest levels in the past decade causing immense pain for some homeowners but chillingly a further three hikes are predicted, which could add hundreds of dollars to already stretched budgets.

It comes as the country’s biggest retailers warn the skyrocketing cost of living is starting to bite with hints there is a slowdown in consumer spending.

Recent research revealed that mortgage stress is escalating after nine consecutive rate rises from the Reserve Bank of Australia with one in eight Aussies having missed a mortgage repayment in the past six months, according to Finder.

Another survey from Mortgage Choice found 71 per cent of borrowers are concerned about coming off their fixed term rate and 55 per cent already feel stretched financially.

The RBA lifted rates to 3.35 per cent last week from a record low of 0.1 per cent in April 2022 and had flagged at least two more increase in its statement.

Australian homeowners are being slugged with hundreds of dollars more in monthly repayments. Picture: Supplied

The hawkish statement from Australia’s central bank warned achieving a soft-landing for the economy was a ‘narrow’ possibility but it remained stubborn about bringing down inflation – prompting growing fears of a recession and wrong footing financial markets, which had expected a pause in rising rates.

Yet RBA Governor Philip Lowe has warned that rising interest rates and high inflation were imposing a “painful squeeze” on households without substantial savings buffers, but his board shows no sign of slowing the rate hikes.

Markets are now predicting interest rates to peak at 4.2 per cent by the middle of this year, from a top of 3.6 per cent just last week – which would take rates to their highest level since April 2012.

Philip Lowe, governor of the Reserve Bank of Australia (RBA). Picture: Brendon Thorne/Bloomberg via Getty Images

The RBA has repeatedly said it wants to bring down inflation, which hit 7.8 per cent at the end of last year, but there are signs the pain of rate rises is starting to crack consumer confidence.

JB Hi-Fi revealed it had experienced flat sales growth since the start of the year and warned the economy was entering “an uncertain period” as consumers became more cautious about spending.

The electronics giant’s like-for-like sales in January grew just 1.5 per cent compared to the same time last year, while sales growth was down by half at white goods retailer The Good Guys.

JB Hi-Fi has seen a drop in sales for 2023. Picture: NCA NewsWire / Jeremy Piper

Investment company Etoro’s market analyst Josh Gilbert said while JB Hi-Fi’s net income grew by 15 per cent for the first half of the year of the financial year, the impact of soaring inflation and interest rates was beginning to emerge.

“Ultimately, consumers aren’t going to be rushing to buy big-ticket items in this current economic environment as the RBA’s rate hikes continue to deliver more pain to households – one reason for this modest outlook from JB Hi-Fi,” he said.

“Consumer caution was also evident in December’s retail sales data, which showed a 3.9 per cent drop.”

Interest rates could be dampening spending. Picture: Newscorp- Daily Telegraph / Gaye Gerard

Online homewares and furniture retailer Temple & Webster revealed on Tuesday that overall sales across the group were down 7 per cent in the first five weeks of trading this year.

Furniture chain Nick Scali also warned of slowing sales at the start of the year.

Alcohol retailer Endeavour Group said sales across its Dan Murphy’s and BWS chains rose 0.2 per cent in the first five weeks of 2023 compared to the same period one year earlier, but spending at its pubs was up.