Yahoo Finance Aussie homeowner gutted over RBA rates forecast: 'Struggling'
Homeowner Maddie Walton said she and many other Aussies would be crippled by another rate hike.
An Aussie homeowner said she and others would be crippled if the Reserve Bank of Australia (RBA) decided to increase interest rates again. The latest inflation data has caused some economists to push back their expectations for a rate cut until the end of 2025, and some believe the current rate of 4.35 per cent could go up before it goes down.
Maddie Walton hustled hard in her early 20s to buy her first home and she's barely been able to save a cent ever since. She told Yahoo Finance there would be some big repercussions for a lot of Aussies if inflation doesn't fall.
"I don't think a rate rise this year is out of the question," she said. "I just think there'll be a massive uproar with how much mortgage holders are struggling."
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Before the RBA's last board meeting in May, where it decided to keep the cash rate on hold at the 12-year high of 4.35 per cent, the situation was already tough for many mortgage holders across the country.
A Compare the Market survey found nearly a quarter of respondents were worried they would have to sell their home or have already sold due to the rising cost of living.
Nearly 40 per cent of tenants were also worried their landlord would increase their rent and leave them homeless.
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A Yahoo Finance poll also revealed the shocking number of Aussies who are dealing with mortgage stress, which is when you spend more than 30 per cent of your salary on your home loan. A whopping 60 per cent of respondents said they were spending 40 per cent or more of their salary on their mortgage.
Walton said a rate increase of 0.25 per cent would add $125 per month to her repayments, which she said would certainly put a dent in her finances.
"I don't even have any money to spare as it is," she explained to Yahoo Finance. "So it would be more cutting into savings if anything."
The impact of a rate hike
If the RBA increased rates, Walton said you could see more properties up for sale as owners find themselves unable to keep up with repayments.
She added that rents could increase for many tenants and people wanting to get onto the property ladder could have their borrowing power slashed by as much as $30,000, which could make or break them.
The mortgage broker said while there was some low-hanging fruit when it comes to cutting expenses, there's only so much you can do. That means more people could soon be looking for second jobs or side hustles to keep their finances in the black.
But that, in itself, has its drawbacks because your work-life balance gets thrown out of whack.
"I used to work two jobs, 70 hours a week and it was not feasible," she said. "That's how I got my home in the first place. But it was not a long-term thing and my mental health definitely suffered.
"It gives you a lot more pressure and stress and increases your cortisol levels and therefore you don't sleep as well."
Nearly a million Aussies have already taken on a second job as the cost of living continues to crunch away at peoples' wallets.
Finder research released last year showed collecting recyclable cans and bottles, as well as selling pre-owned goods, were two of the most popular side hustles in Australia.
What are interest rates going to do in the next 18 months?
That's the million-dollar question everyone is dying to know.
RBA governor Michele Bullock warned a rate hike isn't out of the question if inflation continues to be stubborn and doesn't come down to the 2-3 per cent target established by the central bank.
“Getting inflation back to target will take time and I think the path will likely continue to be bumpy, we should all be prepared for that,” Bullock said after the last board meeting.
“We don’t think we necessarily have to tighten again – but we can’t rule it out. If we have to, we will."
Following the CPI data released this week, economist Warren Hogan said a rate hike is the "only option" unless something dramatic happens.
"The inflation is not disappearing, the cost pressures are there, the domestic inflation is there, and it's all up to the Reserve Bank," he said on Sky News Australia.
"If they don't do it, no one else will because the government's certainly not really doing it.
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"So I think they're going to go in June. I think it's the only option they've got."
The Big Four banks have been predicting a rate cut in November this year, while other economists were placing their bets on one in May next year.
But those predictions have been pushed out and some experts aren't predicting mortgage relief until at least November or December 2025.
Walton said waiting 18 months for a reprieve would be tough to stomach.
"It just delays more plans that you have for that extra money that you could have saved," she explained to Yahoo Finance.
"Everyone's holding out for it, we all have things that we want to divert our money to.
"Some people have children that they want to spend more things on. I have to stop potential travel plans, renovations to the house, also starting up a new business so less money can go to that."
