Eighth straight rate hike hits local mortgage holders

AT its most recent meeting the Reserve Bank of Australia Board decided to increase the cash rate target by 25 basis points to 3.10 per cent. It's the eight straight rate hike by the central bank, and has a number of mortgage holders stretching the weekly budget, including some Mansfield Shire residents. "Inflation in Australia is too high, at 6.9 per cent over the year to October," said Philip Lowe, Governor of the Reserve Bank of Australia in a statement released last week. "Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role. "Returning inflation to target requires a more sustainable balance between demand and supply," While the latest Census data shows the Mansfield LGA has higher levels of outright home ownership compared with the state and country averages (47 per cent versus 31 and 31 per cent respectively), there are still 31.7 per cent – just over 1200 local homeowners – who could be feeling the pinch with the spate of recent hikes. Local mortgage broker, John Mongan from Peak Finance, said that while he has clients who are reviewing their existing mortgages and refinancing to get a better rate, first home buyers in the area remain active. "First home buyers are still leaning more towards variable rates to increase their borrowing capacity," said Mr Mongan. "Fixed rates limit their ability get an achievable first home in Mansfield. "Prices are stabilising a bit, but it's not stopping anyone at the moment; they're happy to borrow a bit extra, and people in the area are still servicing that comfortably." Governor Lowe said back in late 2020 and reiterated throughout 2021 that interest rates would not likely rise until 2024. Off the back of that, around 300,000 Australians mortgaged up with loans six times more than their annual incomes with as little as 10 per cent for a deposit. "I'm sorry that people listened to what we've said and acted on that, and now find themselves in a position they don't want to don't want to be in," Governor Lowe said back in November. "But at the time, we thought it was the right thing to do. "And I think looking back would have chosen different language. "We didn't get across the caveats clearly enough, and the community heard 2024; they didn't hear the conditionality. "That's a failure on our part, and we've certainly learned from that." The RBA have said that a further increase in inflation is expected over the months ahead, and is forecast to peak at around 8 per cent over the year to the December quarter. Inflation is then expected to decline next year due. Mr Mongan said that with prices stabilising in Mansfield, we'll likely see a couple more rate increases next year, before things begin to even out. "I think we'll get a couple more next year," said Mr Mongan. "Not in January because the RBA doesn't meet again until February, but we'll definitely see a couple of more rate hikes, and then see it flatten out as inflation stabilises and comes down. "Because that's really the only control the RBA have got to tighten everything up."