Yahoo Finance $65 or $130 a month? How the RBA's interest rate hike will impact your mortgage
The RBA has today hiked the official interest rate for the first time in 12 years by 0.25 percentage points, taking the cash rate to 0.35 per cent.
If the banks pass on this hike in full, the average borrower with a $500,000 loan and 25 years remaining will see their repayments rise by $65 a month.
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Someone with a $1 million loan will see their repayments rise by $130.
According to data from RateCity this is how much your monthly repayments could rise if you’re on the average variable rate of 2.92 per cent with a loan of 25 years:
$500,000 loan - $65 a month
$750,000 loan - $98 a month
$1 million loan - $130 a month
Already, low-rate lender Homestar Finance announced it will keep its lowest variable rate loan unchanged at 1.79 per cent. However, this rate is only for new customers.
The cash rate will keep moving in the coming months.
RBA governor Philip Lowe said further hikes will be required to bring inflation back into the target band.
Borrowers must brace themselves for further rate pain. Westpac was previously predicting the cash rate could rise to 2 per cent by May 2023.
If this happens, the average borrower with a $500,000 debt could see their repayments rise in total by around $511 by May 2023.
“Today’s hike marks the end of an era for Australia’s cash rate,” RateCity research director, Sally Tindall, said.
“At 0.35 per cent the cash rate is still historically incredibly low, but there are plenty more hikes around the corner.
“Money is going to start to get more expensive to borrow, and quickly.”
Tindall said she expects the majority of banks will pass on the hike to borrowers in full, however some lenders may opt to keep their lowest rates on the table for new customers.
“If you’re on a variable mortgage rate, find out what your bank intends to do but more importantly, check it against the competition,” she said.
“Right now, there’s a 1.13 percentage point gap between the average existing variable rate and the lowest rate.
“If you can get a full percentage point off your rate now, you could protect yourself against the next four cash rate hikes,” she said.
How to calculate your new mortgage repayments
There are a number of home loan calculators available to help you understand exactly how much your personal situation might change.
Here are some calculators you can use:
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