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Only 23 per cent of experts have predicted the Reserve Bank of Australia (RBA) will hike the cash rate at its meeting today, with the other 77 per cent forecasting the central bank will hold off until June.
However, according to Sarah Megginson, senior editor of money at Finder, six of the seven predictions for a May cash rate increase were submitted after Wednesday’s inflation results.
AMP chief economist Shane Oliver was among those predicting a rise.
“Inflation has blown out to above 5 per cent, full employment has been reached and it's now only a matter of time before official wages data picks up,” Oliver said.
“Delaying further will risk a rise in inflation, making it harder to get inflation back down.”
Angela Jackson from Equity Economics also forecasted a rise.
“Latest inflation and employment data warrants commencement of further monetary policy settings,” she said.
Others were unsure the RBA would raise rates before the election and before the wage price index was released.
“We all know rate increases are coming but I don't think they will do it just before the election,” QUT finance expert Noel Whittaker said.
David Zammit from Mortgage Choice agreed.
“The economy is strong, with the unemployment rate sitting at a record low and while inflation is rising, it is unlikely the RBA will lift the cash rate right before the federal election, so I don’t expect to see a change in May,” Zammit said .
“However, a compelling case is building for a move in June pending the results of the March quarter CPI and wage price index, which will be released later this month.”
Widespread mortgage defaults not likely
While rising interest rates pose a concern for many mortgage holders, as many as four in five borrowers have enough of a buffer to absorb higher mortgage repayments.
A survey of more than 1,000 mortgage holders by Money.com.au found around 14 per cent of respondents had more than $100,000 in funds in a mortgage offset account, redraw facility or savings account, 28 per cent had more than $50,000 and 41 per cent had more than $20,000.
However, the remaining 20 per cent were in a vulnerable spot.
“The research also found 20 per cent of borrowers had no buffer at all,” licensed financial adviser and Money.com.au spokesperson Helen Baker said.
She said there were many reasons people could have found themselves in this situation, including a loss of job during COVID.
“Others might have used their savings buffer to clear some debt rather than borrow a higher amount and retain a buffer on a new property,” she said.
“Older borrowers may have also used their buffer to reinvest in property while interest rates were low.”
She said there were ways people could soften the blow of rising interest rates, including consolidating debts and paying mortgages fortnightly.