Australia’s an interest rate rise circus at the moment

If you’d been reading The Australian newspaper’s website last week instead of ours, you might have thought for a short time that the Reserve Bank had raised the cash rate after all. According to the clever nit-picker that is Media Watch, The Australian obviously had a “interest rates have risen” story ready to go the second the Reserve Bank announced a change – as many had expected them too – but then they kept rates on hold! In some kind of technological confusion, The Australian still managed to publish an article saying that we would be paying more for our home loans. Thank goodness they were wrong!

Unfortunately, they probably won’t be wrong for long. Speculation is rife that a Reserve Bank led rate rise is just around the corner, with organisations like the Mortgage and Finance Association of Australia warning us that we should plan for an iminent rate rise and that last week’s non-change is really just a lucky break for us.

Others are speculating that a rate rise could happen even sooner than the next Reserve Bank meeting in the first week of November. The banks have been grizzling for quite a while now that extra costs are making their home loan products difficult to sustain at the current interest rates (although I suspect their profits are still looking pretty good) – the government continues to tell banks that they should not make any out of cycle rate rises, but the banks are adamant that the rises in funding costs have to be passed on to customers at some stage. However, raising the rates outside of a Reserve Bank rise would be a very unpopular move and only a brave bank would do it – unless they all manage to do it together. Another wait and see.

Discuss