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Cost of living: These Aussies paying $1,520 more per month

Australian money piled on top of itself and a crowd of people walking down the street to represent the rising cost of living.
Interest rate increasing are putting pressure on Aussies already struggling to keep up with the rising cost of living. (Source: Getty)

The Reserve Bank of Australia (RBA) has hiked interest rates by another 0.25 percentage points to 2.85 per cent - putting more pressure on Aussies struggling with the rising cost of living.

Not only that, but the RBA made it clear more rate hikes were on the way.

If you’re a homeowner, that RBA meeting on the first Tuesday of each month has probably become your least favourite day.

And it’s not surprising.

The Big Four banks are expected to pass on the rate hike in full - as they have done for the previous six hikes.

This means someone with a $500,000 mortgage with 25 years remaining on their loan on a standard variable rate would be paying $760 a month more than in May.

That same borrower, but with a $750,000 loan, would be paying $1,140 more per month.

And someone with $1 million remaining on the loan would be forking out an extra $1,520 more per month than they were before the hikes started.

So, what can borrowers do to save?

Consider refinancing while you still can analysis found if an owner-occupier variable borrower with a $500,000 debt at the start of May, and 25 years remaining, refinanced to a rate of 4.5 per cent today, they could save $10,268 in the next two years.

Someone with $750,000 remaining on the loan could save $15,727 and someone with a $1 million loan could save a whopping $21,185.

RateCity research director Sally Tindall said that, after this month's rate hike, the most competitive rate was expected to be around 4.5 per cent.

“Time is money. For the average borrower, every month you wait to refinance a $500,000 loan is costing you around $300 a month,” Tindall said.

“Many people might even find they won’t get access to the biggest discounts as property prices slide. Some borrowers might find they can’t refinance at all.

“Stop kicking yourself that you didn’t fix when rates were at record lows. Instead, take action now while you still have the equity in your loan, and claw back some of those savings.”

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