Yahoo Finance RBA rate hike: Aussies borrowers to pay $1,134 more per month
Aussies will soon be paying thousands more on their home loan.
Aussie mortgage holders are in for more rate pain, after the Reserve Bank of Australia (RBA) decided to lift interest rates by another 0.25 per cent yesterday. That took the cash rate to 4.10 per cent - the highest it’s been in more than a decade.
If lenders pass on the full rate hike, as anticipated, the average owner-occupier with a $500,000 loan with 25 years remaining will see their monthly repayments increase by $76, according to RateCity.
In total, a borrower with a $500,000 loan at the start of the hikes will see their repayments increase by $1,134 since the rate hikes began in May last year.
Also read: RBA deals ‘shock’ $15,000 blow to Aussies as interest rates rise again
Also read: Mortgage stress at highest level since 2008: 1.4 million Aussies ‘at risk’
Also read: Interest rates: How to save $12k by refinancing your mortgage
Expected increase in monthly repayments
Loan size | June hike | Total increase - May 22 - June 23 |
$500,000 | $76 | $1,134 |
$750,000 | $114 | $1,701 |
$1,000,000 | $152 | $2,269 |
Borrowers confused
RateCity research director Sally Tindall said the latest rate hike would put many borrowers into financial territory “they never thought they’d see in the life of their loan, let alone in just over a year”.
Many borrowers will be charged higher interest rates in the next two weeks, Tindall said, but, in many cases, the extra money won’t come out of their bank accounts for another three months.
“The seemingly haphazard approach to increasing customers’ monthly repayments is causing confusion among borrowers who are just trying to make the dollars and cents add up,” she said.
“Our research shows most variable borrowers have no idea what rate hike they’ve started paying for and which ones are still to come, making it next to impossible to budget.”
Call your bank
Tindall recommended borrowers call their bank to check what their new monthly repayments would be and what they could rise to if there were more rate rises.
“If you’ve got a variable home loan, call your bank and ask them what your repayments will be if it passes on this latest hike. Throw another one in for good measure and start paying that amount today,” Tindall said.
“If you can’t afford these higher repayments, you’ll have time on your side to do something about it.”
What does a good mortgage rate look like now?
The average owner-occupier is now barrelling towards a mortgage that starts with a ‘7’ - with the average borrower who hasn’t haggled on a rate of 6.86 per cent.
New customer rates are still significantly lower, RateCity found, however, none of the Big Four banks will be offering ongoing variable rates below 6 per cent if they pass on yesterday’s hike in full.
The average lowest variable rate from the Big Four is estimated to be 6.06 per cent once the hike flows through. Westpac will offer a 5.84 per cent rate on its basic loan, but this is for the first two years only.
A competitive mortgage rate will now be below 5.75 per cent, according to RateCity, while an ultra-competitive rate will be below 5.50 per cent.
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