Financial guru Mark Bouris has warned that interest rates are unlikely to fall until next year as inflation takes longer than expected to subside.
The cash rate was left unchanged last month at a 12-year high of 4.35 percent, but the Reserve Bank of Australia warned in the minutes of its most recent meeting that inflation remains high.
The Reserve Bank’s latest forecasts expect inflation to fall to 2.8 percent by December 2025.
But minutes from the June meeting, released on Tuesday morning, suggested it could take a little longer for inflation to subside. That’s bad news for the 3 million Australians with mortgages.
Mr Bouris, founder of Wizard Home Loans, said at Sunrise that the second quarter inflation figures, which are published at the end of July, provide the best indication of where inflation is heading.
When co-host Matt Shirvington asked whether interest rates would fall anytime soon, Bouris replied that this was unlikely in the near future.
“I don’t know if we’re close yet, but I think interest rates are probably not going to come down until sometime in 2025. That’s what economists who are involved in money marketing are predicting anyway,” he said.
‘The Reserve Bank’s predictions about what their rate hikes would do will take longer to materialise. It just takes longer for people to adjust their spending.’
Financial guru Mark Bouris has said interest rates are unlikely to fall until next year, amid bleak news that rates could rise again as inflation takes longer than expected to kick in.
The chairman of mortgage provider Yellow Brick Road added that the 30 per cent of Australian homeowners who don’t have a mortgage are the ones who are spending money.
“The other 31 percent who do have a mortgage are in trouble,” he said.
The minutes of the RBA’s June meeting also showed that the board had discussed raising the cash rate.
“Raising the cash rate at this meeting could be appropriate if members consider that policy settings are not restrictive enough to bring inflation back to target levels within a reasonable time frame,” the report said.
After the RBA’s latest meeting, Governor Michele Bullock confirmed that her board had considered a rate hike during the two-day meeting.
“Yes, the board discussed raising interest rates at this meeting,” she told reporters.
Australia’s most powerful central banker also confirmed that there has not even been any discussion of a rate cut, despite mortgage borrowers facing the most aggressive rate hikes since the late 1980s.
“No, no budget cuts have been taken into account,” she said.
A further rate hike would take the RBA’s cash position to a new 13-year high of 4.6 per cent and add $100 a month to repayments on an average $600,000 mortgage.
The Reserve Bank will meet again on August 5 and 6, after more comprehensive second-quarter inflation figures are published on July 31.
Two of Australia’s four largest banks – ANZ and NAB – now expect rate cuts to be delayed until 2025, while the Commonwealth Bank and Westpac still expect easing in November.