Scary interest rates warning issued

Even if there is good news in the short term for homeowners on interest rates, worse may be coming, experts warn.

Economists are sounding the alarm bell on another interest rate hike, with some claiming the Reserve Bank could be forced to increase the cash rate again as early as next month.

Most economists and lending experts surveyed by recent Finder.com.au polling said they expected the cash rate to stay on hold at the RBA’s monthly board meeting on Tuesday, but some said a further rise later in the year remained a possibility.

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New RBA Governor Michele Bullock has her work cut out. Picture: NCA NewsWire / Martin Ollman

Finder surveyed 38 experts and economists to weigh in on what they expected to happen with the country’s cash rate.

Graham Cooke, head of consumer research at Finder, said inflationary pressures were persisting, putting pressure on the RBA to implement further rate hikes.

Forecast for the cash rate peak has now increased slightly from an average of 4.10 per cent to 4.30 per cent, according to Finder’s expert panel.

Peter Boehm, from Pathfinder Consulting, expected a rate rise before the year was over.

“If underlying inflation holds at this level for another month, the chances of a rate increase in November are almost certain,” he said.

Aussies are struggling with price increases almost everywhere.

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Sydney sale and auction results, week ending October 1

Tony Sycamore, from IG Markets also expected the rate rise would come as soon as November.

“We continue to look for one more rate hike in November as fine tuning of the RBA’s monetary policy, before a period of on hold during the first half of 2024.”

It comes as Aussies grapple with substantial rises in the cost of living.

“We have seen a sharp rise in stress caused by housing, energy, petrol and grocery bills,” Mr Cooke said.

“Another rate hold will be welcome news to the many homeowners who are already at the end of their tether,” he said.

RBA showed the value of Aussies income had declined three per cent due to inflation. Picture: NCA NewsWire / Martin Ollman

“Our data shows that many households are at breaking point, 36 per cent of mortgage holders struggled to pay their home loan in September.”

RBA data showed the value of wages had declined by three per cent due to inflation.

Three out of four of Finder’s panellists do not expect any growth in real wages in the coming year.

While some experts who weighed in believe the cash rate has peaked, 42 per cent said that the rate will peak at either 4.35 or 4.6 per cent.

Aussie mortgage holders could see another rate rise before the year is over.

Mala Raghavan, from the University of Tasmania agreed that the sustained high inflation rate was a cause for concern.

“It significantly exceeds the RBA’s target range of 2 to 3 per cent,” she said.

Substantial increases in fuel prices and household expenses including food, electricity and gas have a considerable ripple effect on various sectors of the economy which would suggest another rate hike soon, Ms Raghaven said.

“If the inflation rate remains stubbornly around the 5 per cent mark in the coming months, the RBA may contemplate implementing a cash rate hike in early 2024,” she said.

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Originally published as Scary interest rates warning issued