RBA lifts interest rates to 12-year high as families brace for more mortgage pain

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Lisa Mammone has her children front of mind in every decision she makes — and having to say “no” to their wants is one of the hardest things she has to do.

The 39-year-old and her husband, Vinnie Mammon, have never really had to do without.

In 2021, the couple remortgaged their Mildura home in order to complete renovations, and increased their loan by an extra $10,000 in annual repayments.

They were one of thousands of Australian families who did not foresee 13 interest rate rises in 18 months. Their yearly repayments have risen by an additional $10,000 since the first hike in May 2022.

They were prepared to pay $490 per week – up from $280 before they refinanced – in order to complete their renovations, but now they will be paying an unaffordable $660 per week.

Ms Mammone said her family dined at her in-laws’ house frequently in order to cut down costs.

“Every hike we get, it goes up anywhere between about $30 or $40,” she said.

Today the Reserve Bank of Australia increased the cash rate to 4.35 per cent — the highest rate in more than a decade.

The bank’s board held the cash rate at 4.1 per cent last month in order to allow time for the economy to adjust to previous attempts at curbing inflation.

‘It hurts me’

But today it lifted the cash rate by 25 basis points and thousands of people will be forced to reassess their budgets.

“It hurts me, because sometimes the kids are like, ‘Can we go and get such-and-such today?’ or ‘Can we go and do this tonight?'” Ms Mammone said.

“I have to say ‘No, we don’t have enough money. Sorry, you must wait until next payday.’

“That’s the most horrible thing that I’ve ever had to say to my kids, and I hate it.”

She said mortgage repayments were not the only household costs the family was contending with — utility, grocery and petrol prices were also posing a challenge.

“We used to buy coffees, we used to buy lunches at work — now we’re finding that we’re cooking extra the night before now and taking those for lunches,” Ms Mammone said.

“We’re making our own coffees or tea at work without spending the extra money.”

No ‘quick fix’

RMIT University economics associate professor Ashton de Silva expects the challenging conditions to persist well into 2024.

“I’m sorry to be negative, but don’t think things are going to get better in the immediate short-term,” he said.

“I think we’re facing a very challenging time.”

Dr de Silva said the situation was unlikely to improve until the RBA was satisfied with the results of the inflation control measures.

“The RBA has increased interest rates and this has had a dampening effect on the market in general,” he said.

“What they’re doing is, in my view … the right thing, and we have to accept that this is not going to be a quick fix.

“But this is something that’s probably going to take some time and, in the meantime, we’ll need to make the best of what will be difficult circumstances.”

(Original ABC Article)