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Extra $433 a month: RBA says interest rates could hit 1.75% by Christmas

RBA governor Philip Lowe on a background of Australian currency.
The RBA is expected to continue hiking rates this year. (Source: Getty)

The Reserve Bank of Australia (RBA) has flagged interest rates could hit 1.75 per cent by the end of the year.

If this were to happen, the average variable borrower could be paying an extra $443 a month on their home loan by Christmas, according to new analysis from

Technical assumptions in the RBA board minutes show the cash rate could increase to 1.75 per cent by the end of the year and hit 2.5 per cent by the end of 2023.

Economists are predicting this could potentially include a 0.40-percentage-point hike in June.

The analysis from RateCity found that would mean the average variable owner-occupier with a $500,000, 25-year principal-and-interest loan could see their monthly repayment rise by an extra $106.

Someone with a $750,000 loan could be paying an additional $159 per month and someone with a $1 million loan could be paying $212 extra.

This is in addition to the increase from the May RBA hike.

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By Christmas, if the cash rate hits 1.75 per cent, a borrower with a $500,000 loan could be paying a total of $443 a month more on their repayments than they were before the cash rate hikes began.

If the cash rate gets to 2.50 per cent by the end of 2023, the same borrower will be paying a total of $651 more on their monthly repayments since the hikes began.

A chart demonstrating how mortgage repayments might rise depending on the loan size.
(Source: Provided)

“While Governor Lowe has said the RBA doesn’t know exactly how high the cash rate will go, or by when, what we do know is there are plenty more hikes to come over the next year and a half,” RateCity research director Sally Tindall said.

“The average borrower is potentially staring down the barrel of a $651 hike in total to their monthly repayments by the end of next year.

“That’s like buying a new dishwasher every single month.”

Tindall said it was important for mortgage holders to work out what their repayments could look like if rates rose by 3 per cent.

“If you don’t think you’ll be able to make these higher repayments, take action now,” she said.

“The longer you wait to make changes, the bigger the bind you’ll find yourself in.”

Tindall said things like cutting back on regular expenses, switching to a more competitive home loan and asking your boss for a pay rise could inject some relief into your budget.

“The national debt helpline is a fabulous resource to help people when bills start piling up around them. Just remember, the sooner you reach out for help, the better,” she said.

Tips to combat rate rises

  1. Cut back on expenses, particularly regular ones. Switch to a cheaper energy provider, rotate entertainment subscriptions, make more packed lunches and cut back on takeaways.

  2. Switch to a lower-rate loan. Four lenders are still offering variable rates under 2 per cent post the RBA’s May hike.

  3. Ask your boss for a pay rise. The average wage is set to rise. Make sure yours does too.

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