How many more interest rate hikes are looming as Reserve Bank raises mortgage payments for the NINTH time in a row - with the average Aussie now paying $12,000 more on their mortgage
- Reserve Bank of Australia has raised rates ninth time
- Cash rate now at a new 10-year high of 3.35 per cent
- Rates rose by another 0.25 percentage points Tuesday
Australian home borrowers have been smashed with a ninth straight interest rate rise - and the Reserve Bank is warning of more increases in 2023, with major banks tipping at least two further hikes.
The RBA cash rate has risen by another 0.25 percentage points to a new 10-year high of 3.35 per cent, up from 3.1 per cent, adding $93 a month to repayments on an average $600,000 mortgage.
Annual repayments are now typically $12,000 higher than they were in May 2022 and the Commonwealth Bank is now expecting two more rate rises by Easter that will make this even worse.
That would add another $281 to average monthly repayments, compared with now before the banks pass on the latest rate rise.
The Greens are calling on Treasurer Jim Chalmers to sack RBA Governor Philip Lowe after he warned on Tuesday afternoon of more rate rises in 2023, despite borrowers already enduring the steepest rate rises since a target cash rate was first published in 1990.
'The board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary,' Dr Lowe said.
'The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.'
Australian home borrowers have been smashed with a ninth straight interest rate rise with the Reserve Bank increasing the cash rate to a new 10-year high of 3.35 per cent
The Commonwealth Bank, Australia's biggest home lender, is now expecting two more rate rises in March and April, that would take the cash rate to a new 11-year high of 3.85 per cent days before Easter.
Gareth Aird, CBA's head of Australian economics, said the Reserve Bank had changed its language to make tackling inflation a bigger priority than avoiding an economic downturn.
'Forward guidance has shifted in a hawkish direction and the reference to not being on a pre set path was dropped,' he said.
'Two further 25 basis point interest rate hikes means the probability of a soft landing for the economy is lowered significantly.
'The budgets of many home borrowers will be under considerable strain over the coming year.'
Until today, the Commonwealth Bank thought February's rate rise would be the last but now it's more pessimistic than Westpac and ANZ, which are forecasting a 3.85 per cent cash rate by May.
Senator Nick McKim, who holds the treasury portfolio for the Greens, called on the Treasurer to sack Dr Lowe - an extraordinary act that would jeopardise the RBA's independence, formalised in 1996.
'Firstly, he needs to ask Philip Lowe for his resignation,' Senator McKim said.
'Secondly, he needs to use the powers he has to reverse today's decision by the RBA.'
The Reserve Bank governor stepped out of his upmarket house in Sydney for a crunch board meeting where it was expected interest rates would be incrased for a ninth straight month
A review into the RBA is due to deliver its findings in March and Senator McKim argued the Labor government could invoke Section 11 of the Reserve Bank Act of 1959 to override its decisions.
'It's time for the Treasurer to stop ducking for cover and start using his power to bring into line an RBA board that is running cover for corporate interests,' Senator McKim said.
The latest rate rise means a borrower with an average, $600,000 mortgage will see their monthly repayments rise by another $93 to $3,303, up from $3,210.
A working couple with a $1million mortgage will see their repayments soar by another $154 a month to $5,504, up from $5,350.
That's based on a Commonwealth Bank variable rate rising to 5.22 per cent in February, up from 4.97 per cent, for a borrower with a 20 per cent mortgage deposit paying off a loan over 30 years.
But under a 3.85 per cent cash rate, a borrower with a $600,000 mortgage would see their monthly repayments climb by another $281 to $3,491, compared with now before the banks pass on the latest rate rise.
A Commonwealth Bank variable rate would increase to 5.72 per cent.
The couple with a $1million mortgage would owe $467 more a month, with repayments of $5,817.
Dr Lowe, 61, looked relaxed as he stepped out of his upmarket Sydney home on Tuesday morning and prepared to inflict more pain on millions of Australians by raising interest rates for a ninth straight month, with January the only month the RBA board doesn't meet.
He famously predicted in 2021 that interest rates would stay at record lows until 2024.
Ahead of Tuesday's crunch meeting, Dr Lowe was spotted leaving his Randwick house in the city's east, where the median house price is $2.9million.
Philip Lowe was seen stepping into a Volvo XC40 SUV, with even the most basic model starting at $53,000
Dr Lowe's Reserve Bank board is widely expected to raise the cash rate on Tuesday afternoon for a ninth straight month, with January being the only month they don't meet
A short walk from Coogee Beach, the property with its park-style garden and wrought iron fence would conservatively be worth at least $4 million.
The married father-of-three was photographed carrying a copy of The Australian Financial Review before driving off in his late-model Volvo XC40 SUV.
Unlike millions of borrowers, the powerful banker - who is on a total remuneration package of $1,037,709 and a base salary of $890,252 - is largely protected from the worst cost of living crisis in more than three decades.
His wife now works at the Australian Prudential Regulation Authority, which sets the rules on banking lending as rates keep on rising.
Inflation is at the worst level in 32 years and the Reserve Bank on Tuesday said more monetary policy tightening would take time to work.
'It will be some time, though, before inflation is back to target rates,' Dr Lowe said.
Philip Lowe, a father of three, lives in the wealthy suburb of Randwick in the city's inner south-east, where the median house price is $2.9million
The RBA's 325 basis point increases since May last year are the most severe since a target cash rate was first published in January 1990.
Dr Lowe has apologised to homeowners who took out home loans based on his forecast that rates wouldn't spike for several years.
'I'm certainly sorry if people listened to what we'd said and acted on what we'd said and now regret what they had done,' he told a parliamentary committee in November.
'That's regrettable and I'm sorry that happened.'
The end of the record-low 0.1 per cent cash rate means borrowers with an average, $600,000 mortgage would, this month, have seen their monthly repayments climb to $3,303, up $997 from $2,306 in early May.
Even if rates didn't go up any more after February, this borrower's annual repayments would be $11,964 higher than they were before the rate rises.
Should the RBA cash rate rise to 3.85 per cent, the average borrower would owe $14,220 more a year compared with May 2022.
A couple with a $1million mortgage would have seen their monthly repayments surge by $1,661 - to $5,504 from $3,843 - equating to $19,932 over a year.
That annual difference would rise to $23,688 under a 3.85 per cent cash rate.
Canstar finance expert Steve Mickenbecker said surging mortgage rates were causing the most pain in the household budget.
'There is no line in the household budget that is hurting borrowers more than the home loan,' he said.
His home with a park-style garden would be worth considerably more, with a likely value of more than $4million
Inflation in the year to December surged by 7.8 per cent, a level well above the Reserve Bank's 2 to 3 per cent target.
But bread and cereal prices last year climbed by 12.2 per cent compared 13.2 per cent for petrol and a whopping 26.6 per cent for mortgage interest, Australian Bureau of Statistics figures on inflation and the cost of living showed.
AMP Capital chief economist Shane Oliver said hiking rates up to 4.1 per cent - as the futures market had recently predicted - would spark a severe recession.
'We are near the top in rates and taking the cash rate to 4.1 per cent or more would be a policy mistake risking a major recession,' he said.
Dr Oliver said the RBA was now likely to raise rates again in March considering a rate cut by Christmas or a year from now.
'Given the RBA’s more hawkish tone we are allowing for one more 0.25 per cent hike in March followed by a pause ahead of the start of rate cuts late this year or early next year,' he said.
Dr Lowe, who is on a total remuneration package of $1,037,709 and a base salary of $890,252, is protected from the cost of living crisis
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