The Reserve Bank (RBA) is expected to hike the cash rate again this week by 0.25 per cent, taking it to 3.60 per cent – the highest level since May 2012.
Another 0.25 per cent rise would mean the average borrower with a $500,000 loan at the start of the hikes in May 2022, could soon be paying a total of $983 more a month on their mortgage. That’s a 42 per cent increase to their monthly repayments since the hikes began.
Someone with a $750,000 loan would see repayments rise by $116 per month, or up $1,474 per month since May last year. For someone with a $1 million loan, monthly repayments would rise $154 compared to last month, or $1,966 per month since rates started rising.
How much could repayments rise in total?
Commonwealth Bank (CBA) predicts there will be one more hike after Tuesday, while Westpac, NAB and ANZ are expecting two more hikes after Tuesday’s meeting, taking the cash rate to 4.10 per cent.
If that happens, analysis from found the average borrower, with a $500,000 debt at the start of the hikes, could see their monthly repayments rise in total by $1,135 in just over a year – a 49 per cent increase.
RateCity research director Sally Tindall said borrowers were facing the 10th hike in as many meetings and there would likely be with more to come.
“The latest inflation figures will be music to the RBA’s ears, but the board is not going to change tack based on one month of data,” Tindall said.
“The board still has a long way to go to get inflation back under 3 per cent and that means more rate hikes are on the way. While no one knows exactly how high rates will climb, work out what another three hikes will look like in your budget, if not more. A cash rate in the ‘4s’ isn’t a certainty, but borrowers should be prepared.”
Mortgage holders and renters suffering
Rising home-loan interest rates, pushing up the cost of loan repayments and rents - as landlords pass on the cost to occupants - are causing financial stress.
Australians have lost confidence in the government and RBA’s ability to ease inflationary pressures and the cost of living, with the majority saying hiking interest rates higher is not the solution, according to Canstar’s Consumer Pulse Report.
The same research found one in 10 mortgage holders and renters had missed at least one mortgage repayment, rent installment and/or other bill since rates started rising in April 2022, and a further one in five report they worried about missing a payment in the near future.
“It is worrying that so early after the first rate increase, some borrowers and renters are already missing payments on their debts, rent and other bills,” Canstar finance expert Steve Mickenbecker said.
“Interest rate increases deployed to slow spending impact consumers unevenly, with borrowers shouldering most of the burden. The result is that 68 per cent of mortgage holders are feeling financially stressed.
“Under-supply of rental properties also sees renters sharing the pain, with 65 per cent of that group reporting feeling financially stressed.”