The RBA cash rate has been officially raised by another 50 basis points to 2.35%. Want to know how much you can expect to pay on your mortgage going forward? Read on and find out how Soho Home Loans can help.
It’s now the fifth month in a row the RBA has increased the cash rate, and the fourth straight double rate increase of 50 basis points.
That’s the highest the RBA cash rate has been in the last seven years.
RBA Governor Philip Lowe said in a statement that today’s increase in interest rates will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy.
“The (RBA) board expects to increase interest rates further over the months ahead, but it is not on a pre-set path,” said Governor Lowe.
It means a household with an $800,000 variable rate loan will pay an extra $1,000 a month than they were before the cash rate hikes at the start of May (with repayments going from $3300 up to $4300 in that time).
How much can you expect to pay on your mortgage after this RBA cash rate hike?
Unless you’re on a fixed-rate mortgage, the banks will likely follow the RBA’s lead and up the interest rate on your variable home loan soon.
Here’s what that means played out in a typical scenario. Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.
This month’s 50 basis point increase means your monthly repayments could increase by about $140 a month. That’s an extra $610 on your mortgage compared to May 1.
If you have a $750,000 loan, repayments will likely increase by about $215 a month, up $920 from May 1.
Meanwhile, a $1 million loan will increase $290 a month, up $1,230 from May 1.
How many more rate hikes are to come?
ANZ and Westpac are both forecasting the RBA cash rate will increase to 3.35% by November and February (respectively) next year.
So that’s another two double cash rate (50 basis points) increases.
Commonwealth Bank and ANZ are a little more conservative with their predictions. They’re tipping rates will hit 2.60% or 2.85% respectively, with just one more single or double rate rise left to go come November.
So where the cash rate lands could be somewhere around those four predictions.
Concerned about your mortgage? Talk to Soho Home Loans
Everybody’s situation is different. So if you’re starting to feel the pinch and are worried about what interest rate rises might mean for your monthly budget, feel free to get in touch with Soho Home Loans today.
Some options we can help you explore include refinancing (which could include increasing the length of your loan to decrease monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.
If you’re worried about how you’ll meet your repayments in the months ahead, give us a call today. We’ll sit with you and help you work out a plan moving forward.
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