Again RBA has lifted the official cash rate to 0.85 per cent

RBA June 2022RBA has lifted the official cash rate to 0.85 per cent, an increase of 50 basis points or half a percentage point on 7th June 2022. The Reserve Bank of Australia has lifted the official cash rate to 0.85 per cent, an increase of 50 basis points or half a percentage point. In early May, the RBA lifted Australia's official cash rate by 25 basis points to 0.35 per cent from 0.1 per cent. The RBA has made the decision to increase rates primarily as a lever to return inflation to its target levels, which is currently sitting higher than the target at 5.1%. Wage growth is currently at 2.4%, which in real terms is -2.7% (inflation less wages growth). This means that Australian workers would be increasingly worse off if inflation is not reigned in. Annual inflation increased to 5.1 per cent in the March quarter, driven by higher housing construction costs and fuel prices. Lenders can set rates independently of RBA movements and their responses to this rate hike may vary. In announcing the decision, Reserve Bank governor Philip Lowe said the rise was in response to the fact that "inflation in Australia has increased significantly, while inflation is lower than in most other advanced economies, it is higher than earlier expected. Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation. But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to the upward pressure on prices. The floods earlier this year have also affected some prices. Inflation is expected to increase further, but then decline back towards the 2–3 per cent range next year. Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago. As the global supply-side problems are resolved and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Today's increase in interest rates will assist with the return of inflation to target over time. If passed on in full by the banks, the rate rise will add $133 a month on a loan worth $500,000 over 25 years, and $265 a month on a loan worth $1 million. In early May, the RBA lifted Australia's official cash rate by 25 basis points to 0.35 per cent from 0.1 per cent. It marked the first rate rise in 11 years – since November 2010 – and forecasts are that the cash rate could hit 2.5 per cent by the end of next year. If this happens, a borrower with a $500,000 loan balance could see their monthly repayments rise by $652 a month by Christmas next year. As a mortgage broker deals with multiple lenders every day, so they know just how flexible they can be to keep or win your business. It never hurts to ask the question, so get in touch to review your existing home and investment loans on 040 380 3470