The RBA reported this month that the Consumer Price Index (CPI), for the December 2007 quarter, rose by 0.9 per cent to 3.0 per cent. On seasonally adjusted figures, this represents the largest quarterly increase in the index since the March 2000/01 quarter. This renewed round of inflationary pressure is likely to lead to additional interest rate rises when the RBA meet next month.
If rates were to again increase it would be the 11th consecutive rate rise since May 2002. Rate Detective Chief Economist, Damon Rasheed, said yesterday that this is a very worrying time for home owners.
"We have seen 10 consecutive 0.25 basis point rate rises from the RBA and still they are losing the battle with inflation with the latest figures showing that inflation rates are again pushing the upper bounds of RBA expectations.
At Rate Detective, we have witnessed a significant increase in the number of home owners rushing to refinance their existing home loans. In addition, more home owners than ever before are switching from variable to fixed rate loans to reduce their exposure to rising rates. This trend will continue to gain momentum with further RBA rate hikes likely during 2008".
The NAB and ANZ both preempted the RBA by increasing their cash rates independent of any RBA announcement. Earlier this month, the NAB increased its official cash rate by 0.12 per cent to 8.69 per cent, while the ANZ increased their cash rate by 0.2 per cent to 8.77 per cent. Both institutions have cited the additional costs of sourcing funds, following the subprime mortgage crisis in the U.S, as the reason for the most recent rate rise. The ANZ increase was labeled as "excessive" by Federal Treasurer Wayne Swan. The other major banks are yet to move on rates but have been quoted as saying they are "monitoring" the situation.
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