In the small world of central bank watchers, Reserve Bank of Australia governor Philip Lowe’s monthly statement is a kind of living Rosetta Stone that helps investors and economists decipher the RBA’s thinking.
The move signalled that not only were RBA interest rate rises “plausible” this year, they were now likely to start in June. Such a move will potentially add thousands of dollars a year to the average household mortgage. The move sent market economists into a spin. “We have been surprised with this very significant change of heart from the board since the March meeting,” Westpac chief economist Bill Evans says.
For households told by the RBA just six months ago that rates would remain on hold until early in 2024, the significance will come in the level of variable mortgage repayments . For borrowers with a $1 million standard variable rate home loan of 4.55 per cent over 30 years, the current fortnightly repayment is $2353. That would increase by $7358 over the year with a 1 per cent increase in the cash rate, assuming the whole increase in the bank’s borrowing cost is passed on.
“It usually takes 12 to 18 months to see the full effects of a change in the cash rate on activity, employment and inflation,” he says.
Source: Loan Digest (loandigest.net)
Mainstream media click click journalism. Tell us some truths... how is money invented? Fiat
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