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Rate rise pain: Aussies hit with $834 home loan hike

Australian houses on street. Australian money notes. Interest rates rising.
The Reserve Bank is deciding whether to hike interest rates next week, or hit the pause button. (Source: Getty)

The Reserve Bank (RBA) is currently deciding whether to hike interest rates or hit the pause button as inflation eases.

According to RateCity research director Sally Tindall, the possibility of a pause has become a “live option” for the RBA off the back of the latest inflation figures released yesterday.

Inflation eased slightly last month with the Consumer Price Index (CPI) rising 6.9 per cent in the year to October, a drop from the 7.3 per cent rise in the 12 months to September.

However, Tindall noted a pause was probably unlikely given the RBA’s commitment to returning inflation to the 2-3 per cent band.

“It’s unlikely the RBA will take its foot off the accelerator entirely next week,” Tindall said.

“The board has said repeatedly it is prepared to do what it takes to get inflation back under control – one drop doesn’t mean ‘job done’.”

With wages growing and unemployment dropping, Tindall said the RBA may want to make one last rate hike before the end of the year.

All of the major banks are expecting the RBA to hike rates by 0.25 per cent when it meets on Tuesday.

What will the interest rate hike cost you?

If the RBA does lift rates by 0.25 per cent, analysis by RateCity found the average borrower with a $500,000 loan could be paying $834 more a month compared to before the rate hikes started in May. The December increase alone could add an extra $75 per month to repayments.

For someone with a $750,000 home loan, the total increase since May could be $1,251, including an extra $113 for the December hike.

For a $1 million home loan, total monthly repayments since May could have increased by $1,668, including $151 more a month for the December hike.

“If you’ve got a home loan, take the summer break to work on your budget and look for ways to make cutbacks,” Tindall said.

“Consider refinancing the mortgage to a more competitive interest rate – it’s one of the biggest monthly expenses but also one of the best ways to save.”

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