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Rate hikes could see mortgage holders owe $202,000 more on their home

·Personal Finance Editor
·3-min read
Mortgage holders: Australian $100 notes stacked on top of each other and an aerial view of an Australian suburb.
Mortgage holders are preparing for higher monhtly repayments as an interest rate hike draws closer. (Source: Getty)

Mortgage holders are preparing themselves for the inevitable after the Reserve Bank of Australia (RBA) gave its surest sign yet this week that interest rates will rise.

And, depending where you live and the size of your loan, mortgage holders could start seeing significant rises in their repayments, according to data from Canstar.

“There is little doubt that the banks will fully pass on the cash-rate increases to borrowers, and it’s expected that multiple increases will follow,” Canstar group executive, financial services, Steve Mickenbecker said.

“Home loan interest rates are likely to be close to 2 per cent higher in a couple of years.”

Canstar analysis found if the cash rate reached 1 per cent this year alone - as predicted by Commonwealth Bank - and lenders passed on the hike in full, the average variable rate would rise from 2.99 per cent to 3.89 per cent.

“This would see monthly repayments for the national median home value of $805,621 rise by $322 per month to $3,036, costing borrowers almost an extra $4,000 per year and more than $116,000 in interest over the life of their loan,” Mickenbecker said.

How a rate change would affect mortgage repayments

Those living in Sydney would feel the burn the most.

The average home price in Sydney is $1,403,154. If a homebuyer put down a 20 per cent deposit on a home of that value, their loan would be $1,122,523.

The cash rate hitting 1 per cent, up from 0.1 per cent, would mean a $561 increase in monthly repayments - or an extra $202,178 in interest costs over a 30-year loan.

In Melbourne, the average house value is $999,037. The loan amount would be $799,230 with a 20 per cent deposit.

Monthly repayments could increase by $400 - adding $143,949 in interest over 30 years.

In Brisbane, the average home price is $856,731 and, based on the same calculations made above, monthly repayments could rise $343.

This would see interest added to the loan over 30 years of $123,444.

The average price for a home in Adelaide is $658,446 and on a loan amount of $526,757, a rate increase could see repayments rise $264 a month and add $94,874 in interest repayments over the life of the loan.

In Hobart, the average price for a home is $791,587 and, based on that, a rate rise could see repayments rise $317 a month. This would add $114,058 in interest costs over 30 years.

The average home price in Perth is $568,108, and a home of this value could see monthly repayments rise $227 and add $81,858 in interest costs.

In Canberra, the average home price is $1,055, 812 and, with a loan amount of $844,650, an interest rate hike could add an extra $422 to monthly repayments.

This would add $152,130 in interest payments over 30 years.

Lastly, in Darwin the average home price is $568,647. A cash rate of 1 per cent could see monthly repayments rise by $228 and add $82,079 in interest costs over 30 years.

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