eli5: who or what is profiting from the MASSIVE interest rate rises in Australia? Is it the banks holding your mortgage? The Government?!.. basically, who is loving life right now?
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Honestly, no one is.
The rising interest rates are being set by the Reserve Bank in an effort to curb inflation by making it less desirable to borrow large sums of money to pay for goods and services. The theory being if people stop spending free or cheap credit for all the overpriced stuff (like mortgages for real estate), then the prices will come down. Hopefully this will flow down to the essentials as well.
Banks aren’t particularly happy about it, because the rise in interest payments for loans they are getting is being offset by the interest they have to pay on their deposits and their own loans.
Consumers already aren’t happy about it, but this had been coming for a long time. The covid pandemic sent the economy into a tail spin, so the reserve bank lowered interest rates to make credit cheap so the wheels could keep turning. Unfortunately at the same time, a lot of real estate prices exploded. Taking both into account it was only a matter of time until prices on other goods followed when pandemic conditions alleviated. Now inflation is higher than expected or desired and interest rates have to come back up anyway, it’s just a very unfortunate timing.
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