Bank boss says rate hike ‘affordable’

Australian families are being pushed over the edge as cost of living pressures soar – but a bank boss says it’s no big deal.

Homeowners were dealt a blow last month when the Reserve Bank of Australia announced the first of many interest rate hikes in a desperate attempt to rein in inflation.

In early May, the RBA raised Australia’s official exchange rate by 25 basis points to 0.35% from 0.1% – a more drastic hike than the 15 basis point hike most pundits had predicted.

It’s the first rate hike in 11 years – since November 2010 – but it won’t be the last, with market insiders expecting rates to continue rising steadily in the months ahead.

In fact, some pundits are bracing for interest rates to rise to 2.5% by the end of 2022, with Nomura Australia Senior Economist and Rates Strategist Andrew Ticehurst recently saying The Daily Telegraphh they believe rates will go up every month until December, which means we could have a rate hike every month until Christmas.

The cash rate situation has caused anxiety for countless homeowners who are already battling the skyrocketing cost of living, raising fears of significant mortgage stress ahead for many.

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But in a new interview, one of Australia’s top banking bosses claimed the next round of rate hikes would be “affordable” for customers.

“Even at 1.5%, we’re still talking about very, very low interest rates,” said Chris de Bruin, managing director of retail and business banking at Westpac. interview with Nine newspapers.

“I think the important thing to recognize is that we’ve been through a long period of ultra-low interest rates, so this is a natural comeback to some extent.

“It’s not that we expect a massive interest rate shock. It is likely to be stable and it is likely to be at an affordable point for the vast majority of Australians.

He said while some “on the fringes” might struggle, most households and businesses would be able to handle rising interest rates, adding that “money would never be free forever”.

Mr de Bruin’s comments come amid new Westpac research which has found nearly two-thirds of small businesses believe the economy will rebound further in the next 12 months – although business owners also highlighted the rising cost of living as the biggest challenge for them in the coming year, followed by inflation, interest rate hikes and Covid disruptions.

Aussies brace for more pain

According to a new survey of pundits and economists, most are confident the RBA will raise the official exchange rate again tomorrow at its June meeting.

In this month’s RBA Cash Rate Survey by comparison site Finder, 86% expect a hike, while 28% think there will be at least two rate hikes before the end of the month. ‘year.

Graham Cooke, head of consumer research at Finder, said Aussies were already feeling the pinch and said there was a chance the June rate hike could be higher than expected – 40 basis points instead of 25.

“The economy is on the brink and some families are really starting to struggle financially with the cost of living – and for those with a home loan, it could get worse,” he said.

“The cash rate increase is good news for savers and will help slow the runaway Australian property market, but those with a home loan are in line for several more cost increases.”

But how far will this go?

According to Bendigo Bank’s David Robertson, the RBA is likely to raise rates steadily in 25 basis point increments over the next nine months, until we approach a cash rate of around 2%.

“They will be careful not to overshoot policy tightening and risk a hard landing, but inflation will rise further due to supply issues, so they will have more work to do,” Mr Robertson said, with the vast majority of experts predicting the peak will be in 2023.

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