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Reserve Bank says households can withstand rate hikes

Ross and Russel
Article image for Reserve Bank says households can withstand rate hikes

The Reserve Bank believes most households will withstand a substantial increase in interest rates.

Speaking yesterday, Reserve Bank deputy governor Michele Bullock said institution thinks the biggest risk to mortgage-holders would be a rise in unemployment.

ANZ predicts the RBA will lift interest rates by two percentage points in the next four months.

A report from ratings agency S&P Global shows the number of mortgage-holders in arrears is at a historic low because many were able to get ahead during the pandemic, with interest rates falling to 0.1.

But the number of households falling behind on their repayments is expected to rise in the second half of this year as interest rates climb.

Senior economist at KPMG, Dr Sarah Hunter, said significant hikes are “almost certainly” going to happen.

She says the cash rate at the end of the year is likely to be “something in the range of 2.5 or 2.6 per cent, it could even be a little bit more”.

Dr Hunter says the RBA is “not worried that lots and lots of people are going to really, really struggle and ultimately default on their mortgage”.

“That’s not to take away from the challenge of interest rates going up … it’s more a question of how many people would really, really get into trouble and may have to default. At the moment with interest rates going up it doesn’t look like too many people are in that group.”

Press PLAY below to hear why the Reserve Bank thinks households can cope

Ross and Russel
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