Home loan borrowers are waiting to see if the RBA will pile another interest rate rise— the 12^th — on them today. And while the rates they’re paying is nowhere near the 18% some Aussies paid in the late 1980s to live the dream of home ownership, economists say they are enduring the heaviest repayment burden in history.

And The Australian’s Patrick Commins says there are economists who think there could be two more on top of today’s expected hike! If these people are right, we will end up in a recession, house prices will fall and a lot of people will be forced to sell their homes, not just because the repayments will become too high but because they’ll lose their jobs!

If these economists are right about this being the heaviest repayment load in history, you have to think that given other rate tightening efforts have beaten inflation in the past, there’s a pretty good chance that what has been done — 11 hikes in just under a year — is enough.

The ANU’s Centre for Social Research and Methods figures that the average indebted homeowner will be using a quarter of their pay to meet their monthly repayments to their lenders. These outlays are 50% more than what they were paying before we’d ever heard of anything called the Coronavirus.

For those of us who remember the rate pain of the 1980s, Associate Professor Ben Phillips at the ANU put the rate pain into historical perspective. “Overall mortgage costs as a share of income are at record highs since 1984 with a very sharp increase in the last two years obviously related to sharp increases in interest rates, but also higher average debt levels,” he said.

This bad news comes as Deutsche Bank economists think the cash rate, now at 3.85%, will peak at 4.35%. Economists who see more rises ahead are blaming the recent rounds of wage rises and the ones that look likely to be in the pipeline that could push Dr Phil Lowe to gamble that he needs more pain on borrowers to choke inflation out of the economy.

I use the word “gamble” because this rate rise strategy is a ‘roll the dice’ affair. Like Russian roulette, Dr Phil is clicking the trigger hoping each rate click up will help beat down inflation.

However, he could click one too far and blow out the economy’s brains or blow-up confidence and we could end up in a recession with unemployment leading to terrible implications for house prices, stock prices and jobs.

Of course, I could be wrong now, as the number of people behind on their repayments is low, but I reckon I could be right in a few months’ time. This from Commins makes me suspect I am right: “Thanks to the three-month lag between RBA rate hikes, and the more than 800,000 homeowners still on ultra-cheap fixed rates, only about half of the past year’s 11 rate rises have actually hit total mortgage repayments across the 3.3 million households with a mortgage, according to the RBA.”

For those wanting to hope there’ll be no rise today, the CBA’s Head of Australian Economics, Gareth Aird, thinks the RBA won’t raise today. Clearly, he thinks the big bite of previous rate rises soon will produce the pain that will stop people spending and feeding inflation.

We economists know there is a lag with raising interest rates, and the question is should Dr Phil look for a quick inflation kill that produces a recession, or should he gamble that his previous rate rises will really start to work in a few months’ time? The latter play just might save us from a recession, forced house sales, job losses and a weaker stock market.

I prefer the non-recession scenario. I hope Dr Phil does too.