Big relief for homeowners in hidden budget detail

A small detail in the federal budget suggests long-struggling Australian homeowners might finally get some relief.

A hidden detail in the federal budget will bring a sigh of relief to millions of homeowners.

Aussie families have been hit hard by relentless interest rate hikes and the surging cost of living.

However the budget outlook predicts rates will stay at their current level of 3.85 per cent before falling next year. .

If this prediction comes true, mortgage repayments for millions of borrowers are likely to have reached their peak.

“Financial markets and market economists now expect the cash rate to remain at 3.85 per cent until early 2024, before gradual cuts back to 3 per cent by June 2025,” the outlook reads.

“This is slightly above expectations at the October budget, which will put a further drag on consumption and dwelling investment activity once the backlog of work is completed in the near term.”

Since May last year, when interest rates were just 0.1 per cent, the average monthly repayment on a $600,000 loan has increased by $1,351.

The Reserve Bank of Australia (RBA) hiked rates by 0.25 percentage points last week, taking the cash rate to an 11-year high.

The bank has warned that further interest rate hikes may be on the cards if inflation fails to fall.

Interest rates may have peaked in Australia in a major win for Aussie homeowners.

In a recent forecast the bank said that inflation had peaked in Australia while the Treasury has said it expects inflation to fall to the target range by 2024 to 2025.

“The Board‘s priority is to return inflation to target,” the bank said.

“High inflation makes life difficult for people and damages the functioning of the economy.

“And if high inflation were to become entrenched in people‘s expectations, it would be very costly to reduce later.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve.”

RBA Governor Philip Lowe says interest rates could keep rising if inflation fails to fall

Inflation is expected to fall from 7 per cent in the recent March quarter to 6 per cent in June and before a more drastic plunge to 2.75 per cent in June 2025, in line with the RBA‘s inflation target of between 2 to 3 per cent.

The federal budget outlook has made it clear that it will not enact expansionary measures that could impact inflation and lead to the RBA tightening rates further.

Finance professor at UNSW Mark Humphries-Jenner believes that the Treasury forecasts seem to be the likely path of the central bank, although we are “at the mercy of the RBA”.

“In terms of interest rates, it is likely they will remain somewhat high for the short term to balance the main drivers including some portions of the community who are cashed up without mortgages and those facing the mortgage cliff,” he told Nine News.

“The RBA needs to balance these two but will need to reduce rates in the not-too-distant future.”

Originally published as Big relief for homeowners in hidden budget detail