The Reserve Bank of Australia (RBA) is tipped to hike the cash rate again tomorrow by 0.50 per cent, taking it to 2.85 per cent, the highest level since April 2013.
If the RBA hikes does in fact lift rates by 0.50 per cent, RateCity.com.au analysis found the average borrower could be paying $760 more a month than they were before hikes started in May.
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For an owner-occupier borrower with a $500,000 debt at the start of the hikes, and 25 years remaining on their loan, the total increase to their monthly repayments could be $760 – a 33 per cent increase since the start of May.
For someone with $750,000 remaining on the loan the total increase in monthly repayments since May would be $1,140.
For $1 million remaining, monthly repayments would have increased $1,520 since May.
How many more RBA rate hikes are ahead?
Just how high the cash rate will go remains a pointy of contention amongst the major banks.
CBA believes it will peak at 2.85 per cent, while Westpac expects the cash rate will peak at 3.60 per cent.
Big Four bank cash rate forecasts:
CBA: up 0.25 per cent in October, peaking at 2.85 per cent in November. Two 0.25 per cent cuts in August and November 2023.
Westpac: up 0.50 per cent in October, peaking at 3.60 per cent in February 2023. Four 0.25 per cent cuts in 2024.
NAB: up 0.50 per cent in October, peaking at 3.10 per cent in November.
ANZ: up 0.50 per cent in October, peaking at 3.35 per cent in December. Two 0.25 per cent cuts in 2024.
How much would monthly repayments rise for each bank forecast?
Analysis from RateCity found the average borrower’s monthly repayments could rise in total by between $760 - $984, based on the Big Four banks’ cash rate forecasts.
Loan sizes are based on a borrower’s debt at the start of the hikes, calculating the total increase from May 1 to each peak.
CBACash rate 2.85%
WestpacCash rate 3.60%
NABCash rate 3.10%
ANZCash rate 3.35%
RateCity research director, Sally Tindall, said the RBA is almost certainly going to deliver its sixth consecutive cash rate hike tomorrow.
“While it’s a difficult call as to how large it will be, another double hike is very much on the cards,” Tindall said.
“While the RBA Governor has indicated the board is looking to slow down the size of the hikes in coming months, based on incoming data, October is unlikely to be the meeting it takes its foot off the accelerator.
Tindall said if the RBA pulls the trigger on yet another double hike, this would see the cash rate rise to its highest level in nine and a half years.
The average owner-occupier rate could also soar to over 5.5 per cent.
“The average borrower may soon be paying an extra $760 a month in interest to their bank, at the same time their petrol and grocery bills continue to rise,” Tindall said.
“Borrowers should realise there’s a 2-3-month lag between when the RBA hikes the cash rate and when this extra money comes out of their bank account.
“You might think you’ve successfully cleared five RBA hikes when really, you’ve only conquered three, potentially even two.”
Tindall said it’s important to work out what your repayments will actually be after the latest hike, but also what they could get to if the cash rate hits 3.6 per cent.
“If you can, start making these higher repayments now, so you know ahead of time you can afford them. If you can’t, start making cutbacks today,” she said.