The Reserve Bank of Australia (RBA), has put a hold on interest rates, but some economists have warned mortgage holders to be very cautious about the current level of borrowing costs.
The central bank kept interest rates at 4.5 percent for the third consecutive month. However, some economists said that RBA’s decision does not mark the end of rising interest rates this year.
"We think that inflation pressures will prompt the RBA to raise rates again before in an article in the end of the year," said Felicity Emmett, a senior economist at RBS, in an article on The Sydney Morning Herald website.
The strong labour market in Australia, with just a 5.1 percent jobless rate, may continue to stir inflationary pressures. With the next official release of inflation figures set for October, analysts expect higher interest rates to follow.
Matthew Circosta, Moody’s Analytic’s economist, said that if inflation increases, “this would leave the door open for another upward nudge to interest rates before the close of the year.”
Since October 2009, over $300 has been added to the cost of repayment for a 25-year mortgage with an average value of $300,000, as many commercial banks passed on the six official quarter-percentage-point increases set by RBA.
Major banks have also said that their own borrowing costs are increasing, adding that they might increase rates despite the central bank’s decision to freeze interest rates.