Inflation figures may increase our mortgage rates

When I was reading the paper on the weekend I can’t say it made my day to see this headline: Warning: Your mortgage is going up. This story was carried by all the major papers across Australia and the headline was enough to make me more than a little concerned, despite having heard that an interest rate rise wasn’t likely until after the election at the earliest.

Of course, the headline was more attention grabbing than the actual article turned out to be. (Funny how often that happens with newspapers.) However, there was a sound basis for the theory that interest rates on home loans could rise soon, and it all depends on what the official inflation figures, due to be released on Wednesday, turn out to be.

The official June reading of inflation for the last quarter is apparently one of the key statistics the Reserve Bank board are likely to use when deciding at the next meeting whether or not they will increase the official cash rate. Experts say if the underlying inflation rate for the quarter is less than 0.7 per cent, we might be safe; over 1.0 per cent, they will raise rates for sure; and if it’s somewhere in the middle, it’s anyone’s guess.

Now, despite the desperateness implied by the headline, this article goes on to say that most economists are predicting the June quarter inflation rate to come in at under 0.7 per cent, which won’t have too much influence on a mortgage rate rise. Wait and see what inflation figures you see on the news on Wednesday night, but it still seems far from certain that August will bring the next interest rate rise. Like I’ve mentioned before, a rise in the payments we have to make on our mortgages certainly does seem inevitable, but it doesn’t need to be as soon as August.

Discuss