Are interest rates going to keep going up?

I think the real answer to this is nobody knows.

Interest rates are driven largely by the cash rate which is determined by the RBA. It’s only a few months ago that the RBA told the Australian public that interest rates would remain low until at least 2024. If the RBA are the ones setting the rate and even they don’t know, I question anyone giving guarantees of where rates will end up.

What we can do is look at what’s driving rates and then make our own assumptions from there.

Why are interest rates going up quicker than a Meerkat on high alert?

The banks will tell you it’s because the RBA is lifting their cash rate and the RBA will say it’s because inflation is out of control. To read more on inflation see an earlier blog post here.

Inflation is at its highest point in 32 years. This financial year, inflation is tipped to peak at 8%. Predictions are that inflation this financial year will be 5.5% to 5.75% before cooling next year to 2.75% to 3.5%.

The RBA’s inflation target is to sit within 2% to 3%.

With the RBA’s inflation target within reach, inflation is set to cool from December onwards, and plenty of buffers are now in the cash rate. Many are predicting the cash rate to go up slightly before falling again next year.

What’s the impact of this? Well if you had a $500k mortgage and interest rates were to go up 0.25% you would be looking at an increase in repayments of $17 per week.

As we said at the beginning, no one knows for sure what will happen but when looking at the driving forces behind it, the cash rate rising above forecast seems a plausible scenario.