RBA hike: Aussies to pay $2,117 more per month
If the major banks pass on this month’s interest rate hike, Aussies will be paying thousands more on their mortgage.
The Reserve Bank (RBA) hit Aussies with a 0.25 per cent interest rate hike this month, bringing the official cash rate to 3.85 per cent - the highest level since April 2012.
If banks pass on the full hike, as it is expected they will, the average owner-occupier with a $500,000 loan and 25 years remaining will see their monthly repayment rise by $78, according to RateCity.
However, this is now the 11th rate hike since last May. For someone with a $500,000 debt at the start of the hikes, their repayments will have increased, in total, by $1,058 every month.
Also read: RBA admits it did a ‘terrible job’ on interest rates
Expected increase in mortgage repayments
May hike (0.25%)
Total increase May 22 - May 23
research director Sally Tindall said the RBA surprised most experts by firing off the 11th rate hike in this cycle.
“By reverting back to a rate hike, the RBA is hammering home the message it is prepared to do what it takes to rein in inflation,” Tindall said.
“After a month’s reprieve, borrowers were still catching up to the rate hikes rather than catching their breath. To have another one piled on top will feel like another kick in the guts.”
Tindall warned this rate hike may be the final straw for families who were already barely getting by.
“Borrowers do not need to take these rate hikes lying down. If you’re on a variable rate, now is the time to do something about it,” she said.
“Homeowners on an uncompetitive rate could potentially wind back the clock by four or five rate hikes, just by switching lenders.”
Refinancing could save you up to $25,000
Refinancing is one of the most effective ways to get relief from the rate hikes.
If someone with a $500,000 debt today and 25 years remaining on their loan refinanced from the average variable rate to one of the lowest in the market, RateCity estimated they could save up to $12,382 in the next two years.
That includes the costs of refinancing and assumes the cash rate moves in line with CBA’s forecast.
Someone with a $1 million loan refinancing from the average rate to one of the lowest could save an estimated $25,914 in the next two years.
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