The Reserve Bank of Australia (RBA) decided to lift the cash rate again this month by 50 basis points to 0.85%.
The rate hike this month follows the surge in inflation reading that hit 5.1% over the first quarter of the year, well above RBA’s expectation.
Furthermore, the unemployment rate fell to its lowest record since 1974, down to 3.9% in April.
PropTrack Economist Paul Ryan said more rate increases are expected this year, especially given the higher-than-anticipated inflation.
“But just how high interest rates will be at the end of the year is a key source of uncertainty for the housing market,” he said.
Financial markets are projecting a cash rate two-percentage points higher at the end of the year, which would raise mortgage repayments by another 24%.
“Major bank forecasters, however, do not view it likely the RBA will increase rates this quickly, predicting rate rises closer to half that much,” Mr Ryan said.
More to come…
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