Homeowners are hit by a rate train

QUEENSLAND homeowners face having to find almost an extra $400 a month of mortgage repayments by Christmas on average, after the first interest rate increase in more than a decade and more on the way.

On top of growing grocery bills from high inflation, it will put more pressure on family budgets and see more people rack up debt on credit cards and buy-now, pay-later schemes, experts say.

RBA governor Philip Lowe confirmed the historically low cash rate of 0.1 per cent would rise to 0.35 per cent, due to inflation rising faster and higher than expected, and warned there would be more to come.

By 6pm, Australia’s biggest lender, Commonwealth Bank, had hiked its variable interest rate by 0.25 per cent while Westpac released a statement notifying borrowers it was reviewing its variable interest rate. The two other major lenders, NAB and ANZ, were yet to reveal how they would modify mortgage rates.

Labor said it was contributing to a “full blown cost of living crisis” the government had to accept some blame for, while Prime Minister Scott Morrison said he sympathised with homeowners and that tax cuts were acting as a “shield”.

He rejected comparisons to the interest rate rise during the 2007 election campaign, when then Prime Minister John Howard went on to lose the poll.

“At that time in 2007, the cash rate was 6.5 per cent. Today, it’s 0.1 per cent. At that time, there was not a war in Europe. At that time, we had not just been through a global pandemic,” Mr Morrison said.

Several key marginal seats for both parties are in areas already suffering the greatest mortgage stress, including Longman, Ryan, Griffith, Blair and Dickson.

Some economists are predicting multiple rate rises in coming months, with the cash rate to hit 1.5 per cent by the end of the year.

Digital Finance Analytics principal Martin North said in the past two years price rises had seen households getting larger mortgages in a “shaky market”.

“The only thing to do is start hunkering down, reducing debt,” he said.

Opposition treasury spokesman Jim Chalmers said the rising interest rates, combined with high inflation and low wage increases, were a “full blown cost of living crisis”.