The Reserve Bank of Australia (RBA) is expected to lift the cash rate by 0.15 per cent on May 3 and potentially again in June by 0.25 per cent.
A rise in the cash rate will most likely be passed on by the banks, meaning customers will see their monthly mortgage repayments rise.
How much will depend on the size of the loan and whether or not you’re on a fixed rate.
But, new research from RateCity found if the RBA hiked by 0.15 per cent in May and 0.25 per cent in June, someone with a $500,000 mortgage would see their repayments rise by $39 next month and, by June, they would be paying $104 more a month than they were today.
RateCity research director Sally Tindall said a rate hike next week was a live possibility on the back of Wednesday’s surging and surprising inflation figures.
“Three of the big four banks are now predicting the RBA will pull the trigger on a May cash rate hike,” Tindall said.
“While a series of rapid rate hikes are imminent, just how high the cash rate will go remains a point of conjecture.”
What are the big banks predicting?
CBA has predicted the RBA will only go as high as a ‘neutral cash rate’ of 1.25 per cent.
Westpac believes the cash rate will reach a top of 2 per cent.
Meanwhile, the markets are predicting it could get to 3.4 per cent by August next year.
“One thing likely to hold the RBA back is the fact that many Australians are up to their necks in housing debt,” Tindall said.
“Many people may now be wondering if it’s worth fixing their home loan, even though ultra-low fixed rates are long gone.
“Think about what suits your finances and your lifestyle and put all of these variables into your equation. The last thing you want to do is panic fix without thinking through your options.”
Tindall said if you decided to fix your rate, it was critically important to shop around.
“There are still relatively decent fixed rates out there, but they are getting harder to find by the day,” she said.
Analysis of the RateCity.com.au database found the lowest 2-year fixed rate was 2.45 per cent and the lowest 3-year fixed rate was 2.79 per cent.