The hot tip from economists is that rates will rise on Melbourne Cup day.
A Reuters poll of 39 economists overwhelmingly found the Reserve Bank would raise the cash rate by 25 basis points to 4.35 per cent tomorrow afternoon.
The bank has kept borrowing costs steady at its last four meetings, but mortgage cost repayments look likely to go up with inflation still stubbornly above the RBA target.
Nearly 90 per cent of economists in the Reuters poll, 34 of 39, said the RBA would raise rates to 4.35 per cent, a level not seen since November 2011.
Repayments have rocketed as interest rates over the past 18 months were jacked up from a record low 0.1 per cent in May last year to 4.1 per cent by June.
Another 0.25 of a percentage point cash rate rise tomorrow would take the total increase in monthly repayments on a $750,000 mortgage since May 2022 to $1815.
All the major banks – ANZ, CBA, NAB, and Westpac – expect a rate hike, with inflation at 5.4 per cent, above the target of 2 per cent to 3 per cent.
Economist Warren Hogan, writing in The Australian Financial Review, said the bank’s “credibility will be shot to pieces” if it did not pull the trigger.
“The RBA board will do the right thing. We will get a rate hike.”
Hogan went even further, adding the RBA should also raise rates in December because of higher-than-expected inflation last quarter and other economic factors.
“Not only should the RBA lift rates on Tuesday, but it also needs to signal that a further increase in December is likely,” Hogan said.
“The RBA needs to immediately inject another 50 basis points of nominal tightening into the economy.”
Hogan’s words will send shivers down the spine of homeowners.
A hike will be the last thing the retail sector wants to start the run-in to Christmas.
According to recent data from credit bureau Equifax, there has been a 33 per cent rise in mortgage repayment arrears across all lenders, compared to the same time last year.
Analysts anticipate the number of homes in arrears will increase as more people move off very low fixed rates.
Over the coming months, another 550,000 Australians will roll off fixed mortgages and onto much higher variable rates.
(9 News)
