The Reserve Bank of Australia (RBA) has increased the official cash rate for the 11th time in the past year, taking it to 3.85%. Have we finally reached the peak of this cycle? And how much will this latest rate hike increase your monthly repayments?
In what will undoubtedly be tough news for many households around the country, this latest rate hike comes despite many pundits predicting the RBA would keep the cash rate on hold for at least another month.
RBA Governor Philip Lowe said while inflation in Australia had passed its peak, at 7% it was still too high and it would take some time before it was back in the target range of 2-3%. “Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today,” he said.
However, in what may come as welcome news to mortgage holders, Governor Lowe softened his language around the possibility of further rate hikes.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” he said.
How much could this latest hike increase your mortgage repayments?
Unless you’re on a fixed-rate mortgage, it’s more than likely there will be an increase to the interest rate on your variable home loan very shortly. Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest. This month’s 25 basis point increase means your monthly repayments could increase by almost $75 a month. That’s an extra $1,060 a month on your mortgage compared to 3 May 2022.
If you have a $750,000 loan, repayments will likely increase by about $112 a month, up $1590 from 3 May 2022. Meanwhile, a $1 million loan will increase by about $150 a month, up about $2,130 from 3 May 2022.
What happens if the cash rate increases further?
Economists are forecasting that the cash rate will now either remain at 3.85% or have one more hike to 4.10%.
Assuming you’re an owner-occupier with a 25-year loan, here’s how much more you could be paying each month if the cash rate reaches 4.10%:
– $500,000 loan: approximately $75 more = up $1135 from 3 May 2022, to a total of approximately $3,470 per month.
– $750,000 loan: approximately $112 more = up $1702 from 3 May 2022, to a total of $5,200 per month.
– $1 million loan: approximately $150 more = up $2280 from 3 May 2022, to a total of $6,950 per month.
Worried about your mortgage?
There’s no denying that a lot of households around the country are feeling the pain of these rate rises. There are also lots of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends.
Working with a Dnister Mobile Lender can take the stress off your shoulders with the uncertainty of interest rate changes. “Refinancing provides access to lower rates, which can potentially save you thousands in the long run. Given the steady increase to interest rates re-evaluating your current lending arrangements could free up some extra cash in the monthly budget”, said Dnister’s Lending and Member Service Executive, Ivanka Bernyk. “We have a range of competitive Home Loan options and our current $2500 cashback offer for the Simple Home Loan Plus is available for new purchases or refinancing from other lenders as an incentive to make the switch”, she added.
So if you’re worried about how you might meet your repayments going forward, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.
Get in touch
Call Dnister today on 1800 353 041 and arrange to speak with a Lending Specialist or book an appointment online.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. In providing you with this information you should consider the appropriateness of this advice with regard to your particular financial situation and needs. We advise that you carefully read our Home Loan Key Facts Sheet and TMD before acquiring a loan product. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent. Applications are subject to Dnister credit assessment criteria. Interest rates are subject to change without notice and should be verified with your local branch. Terms and conditions, including fees and charges, apply. For full details on our products and an analysis of your personal requirements, please arrange for an appointment with one of our friendly lending staff by contacting your local Dnister branch
