Borrowers facing surprise RBA rate hike

There's a 25 per cent chance the Reserve Bank could shock Aussies with a super-sized interest rate hike tomorrow, a lead economist from one of the nation's big four banks has warned.

Gareth Aird, head of economics at Commonwealth Bank, said the RBA could decide to slug borrowers with a hefty 0.4 per cent rise, taking the cash rate to 3.5 per cent.

If that one-in-four chance materialises, households with an average-sized home loan would suddenly need to find another $150 each month to service their mortgage.

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But the most likely scenario, Aird wrote in a market note, is that the RBA lifts the cash rate by 25 basis points, or 0.25 per cent, to 3.35 per cent.

Still, Aird described a possible 40 basis point shift to 3.5 per cent as "a non-trivial risk".

The RBA could then "keep the cash rate on hold over the period ahead while it assesses the impact of the cumulative rate increases".

Commonwealth Bank is forecasting interest rates to peak at 3.5 per cent, but Deutsche Bank economists expect the official cash rate to hit 4.1 per cent by August.

In a market note, Deutsche Bank predicted 25 basis points hikes to occur in February, March, May and August.

Canstar, a financial comparison site, said its analysis showed borrowers are staring down the barrel at as many as six more interest rate hikes.

Most experts tip the bank to make a ninth-straight hike tomorrow afternoon.

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Rates were just 0.1 per cent in May last year, when the RBA began to lift rates in response to rising inflation.

The latest December quarter inflation data showed that inflation had reached a 32-year high of 7.8 per cent.

After eight-straight hikes, one in five homeowners now admit they have borrowed too heavily on their mortgages, a survey last month revealed.

Average monthly repayments have soared nearly $1000, up from $2231 to $3128, based on a $500,000 home loan.

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Many homeowners are now buckling from an annual increase in payments which have leaped from $26,772 to $37,536 in just eight months.

A steady rise in energy bills, petrol prices and cost of food across 2022 is exacerbating the issue.

Are you worried about paying your mortgage after all the RBA hikes? Email msaunokonoko@nine.com.au.

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