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Inflation to increase home loan interest rate

The RBA is widely expected to lift the official cash rate 25 basis points when it meets next Tuesday.

The Australian economy is now back to growing at around trend, with business surveys suggesting it is operating at near capacity. I am unsure of how this statement can be accurate with most small business owners still struggling.

In addition, the unemployment rate has fallen to around 5.1 per cent, which is close to most estimates of the natural rate. With this in mind it is likely we will see inflation increase, which would force the RBA Board to lift rates on November 2.

With inflation of 0.8 per cent in Q3, there is  motivation for a 25 basis point rate hike – taking the cash rate to 4.75 per cent.

My view is that the housing market will take a further bath should we get another rate rise on Tuesday. I don't believe inflation is above trend  so the RBA should leave rates on hold.  However I do think an interest rate rise is on the cards.