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Australia’s financial regulators have warned more and more homeowners are falling behind on their mortgage repayments on the same day ANZ said relief is even further away than hoped.
The bank became the first of the big four to push back its prediction of an interest rate cut until next year, forecasting the RBA won’t lower the cash rate until next February thanks to higher-than-expected inflation data in the last two months.
“The stronger than expected Q1 CPI also makes it hard to see the RBA being sufficiently confident that inflation will return to and stay in the band by the time the November meeting comes around,” ANZ head of Australian economics Adam Boyton said in a research note.
“Accordingly, we now expect the first cash rate cut in February 2025.”
That will come as bitter news to households struggling to keep up with their mortgage repayments.
According to the Council of Financial Regulators (CFR), that group that is only getting bigger after 13 interest rate increases since early 2022.
The council, which is made up of the Reserve Bank, Federal Treasury, ASIC and APRA, said that while most borrowers are still making their payments, the number who aren’t is rising.
“While budget pressures from inflation and interest rates continue to be widely felt, with many households making adjustments to their finances, most borrowers have continued to meet their debt repayments,” CFR said in a statement following its latest quarterly meeting.
“Members observed that the share of borrowers falling behind on mortgage payments has continued to rise, as have financial hardship applications, but from a low level.”
In a sliver of respite for those struggling with their loans, ANZ doesn’t think borrowers will be hit with another hike before rates start to ease, despite recent inflation data stoking fears of a 14th increase.
“It’s not that monetary policy isn’t working. It is,” Boyton said.
“The economy has clearly slowed, particularly across private final demand. It’s for this reason that we think a rate hike remains unlikely.
“However, getting an appropriate balance between the level of demand and supply is likely to take a little longer than expected.”
Australia’s other major banks have all pencilled in a rate cut for November.
RBA Governor Michele Bullock has said while she doesn’t want to increase interest rates again, her bank is committed to doing whatever is required to bring inflation back to its 2-3 per cent target.
