Canstar data insights director Sally Tindall said that \u201cinflation is moving in the wrong direction, and it\u2019s taken the prospect of another rate cut completely off the table\u201d.<\/p>\n
\u201cConsumers were hoping for a bit more relief next year, but this latest CPI read has poured cold water over expectations,\u201d she said. \u201cIf anything, the conversation is now shifting to whether the cutting cycle has already run its course, and potentially, what it would take for the central bank to revert back to hikes.<\/p>\n
\u201cWe\u2019re already seeing fixed rates creep up as markets recalibrate their prices on the back of rising inflation. With another round of data confirming inflation is proving problematic, more hikes are likely to follow.\u201d<\/p>\n
Curve Securities chief executive Andrew Murray said that while last week\u2019s ABS data needed to be taken \u201cwith a grain of salt\u201d given it was the first release in the series, economic data had generally underscored that while inflation had broadly come down in the long term \u201cit\u2019s not continuing in that trajectory and there is some risk it is turning around and going up\u201d.<\/p>\n
\u201cThe market has made the assumption that the RBA will not be doing any more rate cuts, and that\u2019s unwinding quite a significant position from before, where the market was thinking there could two or even three more cuts before we finish the cycle,\u201d Murray said.<\/p>\n
Wholesale interest rates, which are reflecting expectations of rate rises, have lifted, with fixed-rate mortgages priced at the wholesale rates, Murray said.<\/p>\n
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\u201cThe ship has sailed on the opportunity to lock in fixed home loan rates in an environment where rate cuts were priced in, and now banks will be progressively increasing their fixed-rate mortgages,\u201d Murray said.<\/p>\n
Further economic data indicating increasing inflation could push fixed-rate mortgages even higher.<\/p>\n
AMP deputy chief economist Diana Mousina said banks were now pricing in the chance of an RBA rate rise, and lenders that had already increased their fixed-rate mortgages could lift them further in the next few weeks.<\/p>\n
Mousina urged caution about the ABS monthly data from last week, saying it was too new to piece together seasonal patterns, but she acknowledged the market would still move based on such releases.<\/p>\n
Mousina believed it was too early to know just how much fixed-rate mortgages would increase, making it difficult for customers to make an informed decision.<\/p>\n
\u201cIn the next few weeks, we could see a little bit of a further rise to fixed rates, maybe in the very short term there will be a bit more of a lift, but unless the market continues to price more rate hikes in, the increases to fixed-rate mortgages should be limited,\u201d she said.<\/p>\n