Reserve Bank urged to hold rates or risk ‘major damage’ to the economy.

Compare the Market economic director David Koch has called for a rate hold.

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The Reserve Bank went a step too far with its last rate hike and doesn’t understand what Australian households are going through at the moment, according to Compare the Market economic director David Koch.

Compare the Market revealed the RBA’s three previous hikes have added $4128 a year to the average mortgage holder’s loan repayments.

RBA WARNED:Cut rates now or face risk

“These hikes are in after-tax dollars – that means you’re going to need to earn roughly $6000 more a year to afford them,” Mr Koch said.

“Most people can’t just pluck that money out of thin air — it’s going to mean making some serious lifestyle changes, with things like holidays and family outings potentially on the chopping block.

David Koch says another rate hike could damage the economy. Picture: Jono Searle

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“I just don’t think the Reserve Bank understands how tough it is for Australian households at the moment.

“They’re being crunched — absolutely crunched — by the last three interest rate increases, rising petrol prices, and the uncertainty around tax changes, particularly for small business owners. It is essentially forcing everyone into hibernation.”

Mr Koch urged the central bank to leave rates on hold when it meets today and tomorrow, or risk major damage to the economy.

“My great fear is that these blows are going to spark a big increase in unemployment,” Mr Koch said.

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“The latest figures showed a slight increase, but as we know, unemployment is often the last piece of economic data to deteriorate in a downturn and, when it does, it comes with a ‘bang’ — out of nowhere — and it’s really hard to stop.”

Mr Koch said borrowers could try to get ahead of further pain by negotiating relief with their bank.

“Everyone should be phoning their bank or broker to see if a better offer is out there,” Mr Koch said.

“We still hear about people on rates above 7 per cent when we know there are rates available in the high 5’s and low 6’s.

RBA Governor Michele Bullock will be announcing a rate decision this week. Picture: Christian Gilles

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“It might not look like much, but it could reduce your monthly repayments by hundreds – potentially saving you thousands over time.”

Meanwhile, Finder’s cash rate survey saw 37 out of 38 panellists predict the RBA would leave rates on hold in June.

Tomasz Wozniak from the University of Melbourne was the only responded confident there would be another hike.

“I believe we’re all set on the rise,” Mr Wozniak said. “All models indicate this decision, with the bond-yield curve models suggesting a more hawkish approach, and univariate models of the cash rate target setting on a moderate increase. If this prediction materialises, this would be the highest level of interest rates since October 2011.”