The Reserve Bank of Australia has announced its fourth rate hike this year.
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The RBA has lifted Australia’s interest rate to a 15-year-high, a move Dr Angel Zhong, a professor of finance at RMIT’s School of Economics, Finance and Marketing, says could hit renters in markets with low rental vacancies, such as Echuca, especially hard.
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“It’s very likely we see banks pass on this rate rise,” Dr Zhong said.
“It’s another blow to mortgage holders, especially with rising costs in other areas.
“I’ve done the calculations and a typical mortgage holder could face an increase of $90 to $100 to their monthly repayments.
“Then there are renters, who often get the costs banks pass on to mortgage holders passed on to them in the form of rent increases, especially in areas with high-demand and low supply.”
Maria Rivera, a senior financial planner at Rich River Wealth, said while the rise would likely cause homeowners and renters alarm, it was important to not jump to rash decisions.
Maria Rivera said the rise would affect people differently based on their financial positions and recommended households review their spending.
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“We always say don’t panic because the rate rise isn’t always passed on by the banks,” Ms Rivera said.
“That being said, history shows banks are very quick to pass on any rate rise, which means people will have to pay a little more and may mean changes to the household budget and cuts to discretionary spending.
“It might also be an opportunity for mortgage holders who haven’t reviewed their loan to go to a mortgage broker and shop around.
“Starting off with little changes makes a big difference.”
Both Dr Zhong and Ms Rivera identified banks and those with money in their savings accounts as those set to benefit the most from the rise.
“A rate rise is kind of like a medicine which no-one wants to take,” Ms Rivera said.
“It’s going to be good for us in the long term because it can help to treat the inflation issue we’re having, but it can be very painful in the short term.
“Until our economy starts having a little bit of breathing room, it’s the RBA’s role to try and get spending under control, and this is one of the ways they do it.”
