Melbourne Cup day rate rise sees another blow to homeowners
The cash rate now sits at the highest it has been since the end of 2011, as 30% of homeowners are in mortgage stress already.
The Reserve Bank of Australia (RBA) has increased the cash rate yet again, after a 4 month reprieve.
Announcing a 0.25% rise on Melbourne Cup day, the RBA lifted the cash rate to 4.35% – the highest rate since the November 2011 cash rate decision.
69% of the economists surveyed by Finder predicted this decision. It comes after the inflation rate for September fell to 5.4%. Although inflation is still trending downwards, that figure is higher than the rate that was forecast.
This is the 13th rate rise since May 2022, and yet another blow to homeowners. According to Finder's Consumer Sentiment Tracker, 74% of Australians are already stressed about their financial situation. Another rate rise for borrowers several weeks before Christmas is sure to make situations harder.
Why did the cash rate rise – and will it rise again?
The RBA has continued to maintain that rates will rise if inflation doesn't come down enough.
Nalini Prassad, an economist from UNSW, said: "Inflation for the September quarter surprised on the upside indicating that there are still inflationary pressures in the economy. Of particular concern is strong services inflation."
Last month, economists were predicting the cash rate could peak at 4.30%. The average prediction has now grown to a peak of 4.40%, suggesting that many economists believe there will be another rate rise in the future.
Out of the economists who predicted a rate rise in November, 13% also predicted another rate rise as early as December. 16% predicted another rate rise in February.
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What can you do if you're in mortgage stress?
According to research from Roy Morgan, 30% of the Australian population are in mortgage stress. If you're one of them, this rate rise will hit hard. The key thing is not to suffer in silence. Here are 3 things you can try:
Speak to your lender
Ask them if you can negotiate your rate to something lower.
Compare other rates
Look at what other interest rates are out there to see if you can get a better deal than what your current lender is offering.
Ask about hardship plans
Finder's research also shows that 49% of Australians who have refinanced are still under mortgage stress. If lowering your interest rate isn't enough to help, speak to your lender about what else they can do. You may be able to take a repayment pause or switch to an interest only plan.
If you're struggling to pay, speak to your lender. It's better to talk to them about your options than slipping behind on repayments.
