RBA interest rate increases paused over holiday season to break the run of eight consecutive rate hikes

The Reserve Bank of Australia (RBA) has given home loan borrowers a breather over the New Year’s break following its previous relentless pummelling of eight consecutive rate rises from May to December 2022.

There was no interest rate increase in January 2023, but that was simply because the RBA board didn’t meet to discuss the subject of the Base cash rate.

And as a result of the perceived kindest shown by the Reserve Bank, many economists are suggesting there may not be many further rate rises are in store for stressed home loan borrowers.

Most pundits expect the RBA to still lift the cash rate at its 7 February 2023 meeting, and if this goes ahead by a 0.25% hike expected, it will increase the cash rate from 3.1% to 3.35%.

Then according to the observation of many economists there may not be another rate rise this financial year until June 2023.

Many home loan borrowers will hang onto every word of diminishing rate rise increases as a great number of loans are coming up for refinancing in 2023 that were previously on much lower fixed term rates than are currently on offer.

While the cash rate remains at 3.1% it equates to a 25-year $500,000 mortgage loan costing $834 a month more to service since rates exploded from a cash base rate of 0.10% in May 2022.

Another 0.25% cash rate hike at the RBA board meeting on the first Tuesday of February 2023 will add about another $80 to the monthly payment on a $500,000 mortgage, which would take the total increase in monthly payments since April to around $910 a month or $11,000 a year.

While a 0.50% hike would add about $160 a month taking the total increase since May 2022 to around a further $995 a month or $11,940 a year.

The next move by the RBA could well be dependent on its expectation that inflation will peak at about 8% by the end of 2022.

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