Mortgage holders could be in for further pain with the Reserve Bank of Australia (RBA) indicating the possibility of further interest rate rises. On Tuesday, the RBA released the minutes of its April meeting, where it decided to leave the official cash rate – which guides interest rates set by lenders – on hold after 10 consecutive increases. The minutes showed the RBA was considering the option of a 25 basis point rise to 3.85 per cent.
The higher interest rate could mean more pain for homeowners, as it would mean an increase in their mortgage repayments. Although any potential rate rise would be small, it could still add to the financial burden of already strained homeowners.
The RBA’s decision to leave the cash rate on hold was welcomed by many mortgage holders, who had feared a further rate rise could put their finances under even more strain. The decision was also welcomed by the housing industry, which has been struggling with high levels of debt and falling house prices.
“At this meeting, it was observed by the members that it was crucial to be explicit that monetary policy may need to be tightened at future meetings, and that the reason for pausing was to give time to collect additional data,” the minutes said.
The central bank seemed to be in a difficult position when it decided to keep the cash rate at 3.6 per cent in April, as it was worried that a surge in population growth and wage increases could cause inflation to skyrocket.
