Mortgage interest charges rose 7% in March quarter: ABS

The Australian Bureau of Statistics (ABS) has revealed that employee households recorded the highest quarterly and annual rises in living costs due to increases in mortgage interest charges in its latest Selective Living Costs Indexes (LCI) data.

During the March quarter of 2024, mortgage interest charges rose 7 per cent, up from 5.4 per cent in December 2023, which reflected the ongoing rollover of fixed-rate home loans onto higher variable-rate mortgages, as well as the “flow-on effects” from the Reserve Bank of Australia’s (RBA) November cash rate hike.

Michelle Marquardt, ABS head of prices statistics, said: “Increases in living costs in the March 2024 quarter ranged from 0.7 per cent to 1.7 per cent, depending on the expenditure patterns of the different household types, compared to a rise of 1.0 per cent in the Consumer Price Index (CPI).

“Employee households recorded the largest increase in living costs of all household types. Quarterly increases in living costs for Employee households have been higher than the CPI since September 2022.”

According to the ABS, employee households were the most impacted by rising mortgage interest charges, comprising a larger part of their spending than other household types.

Annually, employee households recorded a rise in living costs of 6.5 per cent, down from the June quarter 2023 peak of 9.6 per cent.

Mortgage interest charges rose 35.3 per cent over the year, well below the peak of 91.6 per cent in the 12 months to June 2023.

The ABS noted that the RBA’s decision to hold the cash rate steady from July to October 2023 led to the easing in this annual growth; however, it still remains elevated due to low fixed-rate loans rolling into higher variable rates.

Marquardt further stated that increases in interest rates and insurance premiums over the year have added to annual living cost rises “ranging from 3.3 per cent to 6.5 per cent for different household types”.

“Employee, Other government transfer recipient, and Pensioner and beneficiary households recorded higher rises than the 3.6 per cent annual rise in the CPI,” Marquardt said.

Further hikes flagged

While the cash rate has remained on hold since November 2023 at 4.35 per cent, Judo Bank’s chief economic adviser Warren Hogan recently flagged that interest rates may peak at 5.1 per cent by the end of 2024.

Hogan said he expects the RBA to begin raising interest rates again in August, followed by two further hikes in September and November.

He stated that the flow of economic data over the last six weeks has “shifted the most likely path” for the economy and inflation.

“Signs of a recovery in economic activity this year and sticky domestic inflation imply that for the economy to remain on the RBA’s ‘narrow path’, a further upward adjustment to interest rates may be required in the 2024/25 financial year,” Hogan said.

[RELATED: Cash rate peak may hit 5.1%: Economist]