Broker group warns of compounding pressure on household budgets
The Finance Brokers Association of Australia (FBAA) has called on the Reserve Bank of Australia (RBA) to hold the cash rate steady at today’s board meeting, saying the economic fallout from the conflict in the Middle East has not yet been fully felt in Australia.
“While economic triggers may exist for the RBA to raise the cash rate, these are not usual times,” said Peter White, interim chief executive of the Finance Brokers Association of Australia. “Australians are yet to experience the cost of living increases that are predicted to hit soon due to the Middle East conflict.
“We expect that not only will fuel costs increase but this will flow through to other supply chain increases and potentially add hundreds of dollars every month to the average household budget.”
White (pictured right) pointed out that if interest rates rise, many mortgage holders may struggle to meet the increased payments, especially the first-home buyers.
Market expectations remain centred on a 0.25 percentage point hike, with the major banks anticipating an increase in the official cash rate.
Canstar estimates that a 0.25 point increase would take the average owner-occupier variable rate to around 6.01%, pushing it into the 6% range. The rate-tracking firm said this would be the first time the average has been above 5% since April 2025.
For a borrower with a $600,000 loan and 25 years left, that would lift minimum monthly repayments by about $91. Taken with a prior increase, the combined effect would be about $181 a month.
| Impact of a 0.25% hike in March on monthly repayments | ||
|---|---|---|
| Debt owing | Hike in March | Cumulative increase (Feb + March) |
| $500,000 | +$76 | +$151 |
| $600,000 | +$91 | +$181 |
| $700,000 | +$106 | +$211 |
| $800,000 | +$121 | +$241 |
| $900,000 | +$136 | +$271 |
| $1 million | +$151 | +$301 |
| Source: Canstar.com.au | ||
Lenders have been repricing home loan rates ahead of the meeting. Over the past fortnight, 27 lenders have lifted at least one fixed rate, while 41 banks have raised at least one term deposit rate.
Canstar’s analysis also points to speed in lender pass-through after the previous move, with most lenders passing on the full increase within two weeks.
“Borrowers across the country are bracing for further mortgage pain, with the governor confirming the discussion around another cash rate hike will be a live one,” said Sally Tindall, data insights director at Canstar.com.au. “Inflation is sitting well beyond the RBA’s target of 2.5%, with rising petrol prices likely to push it even higher, at least in the short term. The Board won’t hesitate to ratchet up the cash rate if it thinks the economy and the jobs market can withstand the extra pressure.
Tindall, however, pointed out that a rate hike is “not yet a done deal”, saying tha the central bank “could decide to wait for a clearer read on the overarching impact of the war in the Middle East on the Australian economy before it makes a move.”
For White, this approach “would prioritise the financial and emotional wellbeing of Australians facing an uncertain immediate future.”
“We would urge the RBA to take a cautious approach and resist increasing the cash rate until the global situation becomes more stable,” he said.
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