Why homeowners could pay more on their mortgages

Australian homeowners may have to resign themselves to higher mortgage payments as political tensions in the US continue to rise.

Australian households could pay more on their mortgages if Donald Trump’s tariff plans spark a trade war, a big four bank boss warns.

In a speech to the Australian Financial Review banking summit, National Australia Bank chief executive Andrew Irvine said so far tariffs on steel and aluminium weren’t a concern, but an escalating trade war could impact Australians.

“The thing I worry about is less about what’s going to happen in the next few months, and it’s beyond ’25,” Mr Irvine said.

NAB chief executive Andrew Irvine warns of the Trump effect on Australian mortgage holders. Picture: Newswire / David Geraghty

“If we do have a global tariff war, and all the drama and tit-for-tat stuff does turn into bilateral trade really reducing, and 25 per cent tariffs (are put) on a vast majority of goods and services that are highly inflationary, and if global inflation ticks up, what that means is that interest rates will not reduce to the level they otherwise would, and I think that could be problematic for Australia.”

Mr Trump has implemented an American-first policy, with the country adding 25 per cent tariffs on all imported aluminium and steel.

He has also added a 25 per cent tariff on goods coming in from Canada and Mexico as well as a 20 per cent tariff on China.

Canada, China and the European Union have all announced reciprocal tariffs.

The Reserve Bank board led by Michele Bullock cut rates at the last RBA meeting Picture: NewsWire / John Appleyard

The Reserve Bank of Australia made its first rate cut in February, dropping the official cash rate from 4.35 per cent to 4.1 per cent, at the time downplaying the risks of the Trump administration on further rate cuts.

This was the first rate cut since November 2020 during the Covid pandemic.

While the NAB boss is still predicting two rate cuts of 25 basis points in the second half of 2025, he said “if this tariff madness does happen, we could be at the end of the reduction cycle, and so we’ll have to wait and see”.

Mr Irvine also used his speech to say Australia so far has been the lucky country, but it won’t last forever.

“We have all the ingredients we could need. We just struggle to find a recipe,” he said.

Mr Irvine said Australia would need to overcome issues including productivity in housing, resources and energy.

“We’re suffocating the development of dwellings. It’s too hard to get planning permission and it takes too long,” Mr Irvine said.

“We’ve also got an issue with skills and labour. There are not enough skilled workers to go on job sites to get dwellings done. There are work practices and housing modalities where we’re not leading the way.”