A Tuesday RBA rate hike could add almost $1,900 a year to a $1m mortgage, with the Finder cash rate survey tipping higher-for-longer settings.
A Tuesday rate hike could slug $1m borrowers by almost $1,900 a year, as economists tip a shock shift back to rising rates.
More than half of experts surveyed by Finder expect the Reserve Bank to raise the cash rate by 25 basis points at its February meeting, a move that would add about $158 a month to repayments on a $1m loan and intensify pressure on household budgets.
Finder’s latest RBA Cash Rate Survey found 51 per cent of panellists tipping a February hike, while more than four in five believe a rate cut in the next 12 months is unlikely, signalling interest rates may remain higher for longer.
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Finder head of consumer research Graham Cooke said the speed of the shift had caught many borrowers off guard after last year’s easing cycle.
“This will feel like a cold shower for homeowners,” Mr Cooke said.
“A 25 basis point rise adds more than $1,300 a year to repayments on the average mortgage, and for larger loans the hit is significantly higher.
“Many people refinanced or entered the market expecting rates to trend lower, not turn back up within months.”
Mr Cooke said lenders had already begun adjusting fixed rates in anticipation of tighter settings, warning borrowers not to assume relief was imminent.
“The rate-cut conversation has clearly shifted,” he said.
“Now is the time for households to understand their rate, their buffer and their exposure.”
Mortgage broker Ari Levinson warns a 25bp move can cut borrowing power fast, with bank serviceability buffers magnifying the impact for buyers.
Baseline Financial director Ari Levinson said even modest rate rises could materially affect borrowing power and cash flow, because banks assess serviceability using current rates before applying buffers of around 3 per cent.
“For existing borrowers, higher rates hit repayments fairly quickly,” Mr Levinsin said.
“For buyers, it can reduce how much they’re able to borrow by tens of thousands of dollars.”
Mr Levinson said that typically triggered a wave of borrower reviews, with households checking whether they were on competitive rates or seeking pricing discounts from their lender.
“In some cases refinancing makes sense, but it needs to be strategic rather than reactive,” he said.
“Fees and admin costs need to be weighed against the long-term savings.”
But industry leaders warn higher rates could have an unintended consequence by further constraining housing supply, particularly in the apartment sector.
HIA economist Tim Reardon says higher rates risk tightening housing supply further, with apartment construction highly sensitive to funding costs and tax settings. Picture: Tertius Pickard
Housing Industry Association chief economist Tim Reardon said housing was already heavily taxed at every stage of development, placing pressure on new supply before projects even reached the market.
“The most counter-productive policies have been taxes imposed on foreign institutions that fund and build apartment projects,” he said.
“They’ve raised very little revenue, but they’ve discouraged investment that would otherwise deliver new homes.”
Mr Reardon said apartment construction was especially sensitive to interest rates and tax settings, given its reliance on investor participation and large-scale financing.
A major bank economist expects inflation to keep the RBA on guard in 2026, with rate cuts viewed as unlikely in the next 12 months. Picture: NewsWire/ David Crosling
What a 25bp RBA rate rise could cost: repayments lift about $109 a month on the average loan and $158 a month on a $1m mortgage. Source: Finder
“When investor participation falls, fewer projects stack up financially and fewer homes get built,” he said.
He warned reduced investment in new construction did not ease housing pressure but instead flowed through to tighter rental markets.
“If investor participation in new builds drops materially, renters ultimately pay the highest price,” he said.
Economists say the RBA faces a delicate balancing act as it weighs inflation control against broader economic risks.
University of Sydney macroeconomics professor James Morley said the central bank’s next moves would depend on whether inflation
pressures broadened or began to ease over coming months.
Finder’s Graham Cooke says borrowers should review rates and buffers now, as the cash rate outlook swings back toward a February hike.
“If inflation measures were to tick up again, the RBA would likely shift to a more hawkish stance,” Prof Morley said.
“Only fairly negative news on the real side of the economy would push it back into a cutting mode in 2026.”
Finder’s survey identified persistent services inflation, housing costs, weak productivity growth relative to wages and elevated government spending as the key forces shaping the RBA’s outlook this year.
Mr Cooke said households should prepare for uncertainty rather than assume the next move would be down.
“The days of expecting steady cuts are clearly over,” he said.
“Higher-for-longer settings change the margin for error for borrowers.”
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