The Reserve Bank (RBA) is set to hike the cash rate for the fifth month in a row today, costing homeowners big.
Most economists are anticipating a 0.5 per cent hike, lifting the cash rate to 2.35 per cent - the highest it has been since December 2014.
If this happens, the average variable borrower could see their monthly repayments rise by as much as $288 a month, assuming banks pass on the hike in full to customers.
However, the RBA has hiked four times already.
For an owner-occupier with a $1 million debt at the start of the hikes and 25 years remaining on their loan, the total increase to their monthly repayments could be $1,229.
Calculations are for existing customers and based over 25 years.
Increase in repayments (Sept)
Total increaseMay – Aug + Sept @ 0.50%
However, the rate hikes are not expected to end today.
Westpac’s economics team predicts the cash rate could increase to 3.10 per cent by Christmas, and peak at 3.35 per cent by February next year, before dropping in 2024.
If this happens, the same borrower with a $500,000 loan at the start of the hikes could see their monthly repayments rise, in total, by $908 in less than 12 months.
Potential increase in repayments by Feb 2023
Based on an owner-occupier paying principal and interest with 25 years remaining
End of 2022(cash rate 3.10%)
Feb 2023(cash rate 3.35%)
RateCity.com.au research director Sally Tindall said if the RBA pushed ahead with another double hike today, the cash rate would hit the highest level since December 2014.
“If this happens, the average owner-occupier with a variable mortgage could be paying an interest rate that’s over 5 per cent,” Tindall said.
“As a result, the average borrower would see their monthly repayments increase, in total, by more than $600.
“That’s a huge amount of extra money to stump up, month after month.”
Tindall said while many households had been able to take rate hikes in their stride, families should work out what their monthly repayments would rise to if the RBA hiked by another 1.5 to 2 percentage points.
“If you think your budget will struggle in the months ahead, don’t wait until the problem hits home, act now,” she said,
“Households that start making cutbacks now are likely to be in a much better position when the rate hikes really start to bite.”