Home borrowers are hurting once again after the Reserve Bank’s latest interest rate hike hits already struggling mortgage holders.
On Tuesday, the RBA board decided to hike its cash rate to a 12-year high of 4.35 per cent – the central bank’s 13th rate rise since May 2022.
New governor Michele Bullock said in an accompanying statement that the latest rise was inevitable after “inflation didn’t slow as expected” and confirmed the RBA remained ready to hoist interest rates again if required.
“Returning inflation to target within a reasonable timeframe remains the Board’s priority,” said Bullock.
“High inflation makes life difficult for everyone and damages the functioning of the economy.
“It erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality.
“And if high inflation were to become entrenched in people’s expectations, it would be much more costly to reduce later, involving even higher interest rates and a larger rise in unemployment.”
While fighting inflation remains an important goal, constant rate hikes have left the average working Aussie family struggling to afford their mortgage repayments.
According to the latest data from Finder, Aussies will need to bring home a minimum wage of $182,000 a year to comfortably afford the average home, which costs $926,899.
That’s almost double the average Aussie full-time salary of $96,000 and three times the $65,000 median income.
Graham Cooke, head of consumer research at Finder, said it’s a tough pill to swallow for homeowners.
“Mortgage holders are already on the ropes, the last thing they wanted was another slug from the RBA,” he said in a statement provided to Build-it.
“People are looking at stretching themselves financially in order to purchase a property.”
Mortgage holders are in the crosshairs
With mortgage holders once again stuck in the crosshairs of rising interest rates, LocalAgentFinder CEO Richard Stevens says homeowners can’t take much more.
“As many as half a million mortgage holders who have struggled to absorb the impacts of rising interest rates to this point are reaching their financial tolerance threshold,” he told Build-it.
“The announced RBA changes are designed to dampen the economic concerns of the ongoing inflationary pressures, however, the true impact of their actions on a significant number of mortgage holders may not yet have been observed.”
Data from Finder showed that homeowners with an average $590,000 mortgage will now be forking out roughly $1,345 more per month than they were in April last year.
According to Shiv Nair, Director of Ray White TNG-Glenwood in Sydney, property owners looking to sell need to act now rather than wait it out any longer.
“Right now, 10 to 20 percent of our sales are from distressed sellers, a figure that looking back six months ago we would have predicted to be more around 50 percent,” Nair told Build-it.
“With the increasing likelihood of more properties listing as we move into March, acting now offers the chance to get in ahead of this.”
Make the banks pay
With no reprieve insight for working-class Aussies, Construction Forestry Mining Energy Union (CFMEU) National Secretary Zach Smith says the nation’s inflation-fighting focus should instead be trained on price-gouging corporations like banks.
“It’s strange how our war on inflation always involves pain for regular people, while the banks and the corporations who actually set high prices get off scot free,” said Mr Smith.
“Families with mortgages have been ordered to eat yet another rate rise, and now they’re being told they can’t have public infrastructure upgrades either. It’s crazy to suggest we need to stop building infrastructure our nation needs just to protect the mega profits of banks and corporations.
“Banks like Westpac could afford to take the hit instead of mortgage holders. Corporations could lower inflation by not jacking up prices, which they could easily afford to do. And if they decide to keep gouging mega profits from us, the government could recoup some of that through a super profits tax.
On Monday, Westpac revealed they had turned a $7.2 billion profit in the 2023 financial year, marking a 25 per cent increase on last year’s return.
Mr Smith called for the government to stop shaking down everyday Aussies and instead set their sights on taxing larger corporations that can afford it.
“Public infrastructure boosts productivity and, more importantly, it improves people’s lives. Millions of Australians benefit when we improve infrastructure,” said Smith.
“Our futures shouldn’t be torched because the government is squeamish about taxing corporations. Ordinary Australians have copped enough punishment from this brutal sequence of interest rate rises.
“Working families can’t be the only soldiers conscripted in the war against inflation.
