Australia eyes barrel of another RBA double hike tomorrow


The RBA is expected to raise the cash rate tomorrow by either 0.25 or 0.50 percentage points as the Board prepares to rein in inflation.

If the RBA raises the cash rate by 0.50 percentage points, as many economists predict, the average homeowner with $500,000 in debt and 25 years remaining will see their repayments increase by $137. This person’s total increase to date, adding together the May, June and July increases, would be $333 per month.

0.50% HIKING: Increase in reimbursements

Calculations are for existing customers and based on 25 years

Amount of the loan Increase in reimbursements (July) Total increase
May + June + July @ 0.50%
$500,000

$137

$333

$750,000

$205

$499

$1 million

$273

$665

Source: RateCity.com.au. See notes below.

If the RBA increases the cash rate by just 0.25 percentage points, their repayments will increase by $68 per month, with a total increase from April to July of $264.

0.25% HIKING: Increase in reimbursements

Calculations are for existing customers and based on 25 years

Amount of the loan Increase in reimbursements (July) Total increase
May + June + July @ 0.25%
$500,000

$68

$264

$750,000

$102

$396

$1 million

$136

$529

Source: RateCity.com.au. Based on owner-occupier paying principal and interest with 25 years remaining. The starting rate is the RBA’s current average homeowner floating rate of 2.86% and assumes that banks pass on cash rate increases in full.

Rate hikes are not expected to end tomorrow. Westpac’s economics team now expects the cash rate could rise to 2.35% by the end of this year and reach 2.60% early next year.

If that happens, the same borrower with a loan balance of $500,000 at the start of the hikes could see their monthly repayments increase, in total, by $685 in less than 12 months.

Potential increase in refunds by February 2023

Based on owner-occupier paying principal and interest with 25 years remaining

Total increase in monthly repayments

from the start of the hikes

Amount of the loan End of 2022

(cash rate 2.35%)

February 2023

(cash rate 2.60%)

$500,000

$613

$685

$750,000

$920

$1,028

$1 million

$1,227

$1,370

Source: RateCity.com.au. Notes: Based on homeowner paying principal and interest with 25 years remaining on the average variable rate and assuming increases are fully passed through. Calculations are based on Westpac’s current cash rate forecast.

RateCity.com.au research director Sally Tindall said: “Australians are potentially eyeing the RBA’s steepest barrel rises since 1994.”

“Floating rate borrowers should brace for another 0.50 percentage point hike this month and potentially another double hike in August,” she said.

“It would be a bold move on the part of the Reserve Bank, but not at odds with actions taken by other central banks to contain inflation.

“Governor Lowe may have poured cold water on suggestions that the cash rate could hit 4% by Christmas, but the RBA is still likely to rip the low-rate band-aid off quickly.

“Borrowers with decent security reserves and a raise in their pockets should be able to afford higher interest rates. However, many families hit by both the rate hike and cost-of-living pressures may soon struggle to make ends meet.

“The cash rate is expected to increase by 2.5 percentage points in less than a year. For the average borrower with a $500,000 loan, this represents a monthly repayment increase of $685.

“Borrowers should sit down and figure out what a 2.5 percentage point increase in interest rates would have on their monthly repayments. If that number isn’t right for them, now is the time to act.

“Refinancing at a lower rate can help inject continued relief into the monthly budget and keep people afloat in what is likely to be a tricky time for some families feeling the heat.”

Is it too late to fix?

“Finding a competitive fixed rate isn’t impossible, but it’s getting harder every day. There is currently only one fixed rate below 3% and that rate has a purpose on its back,” she said.

“People committed to fixing their rate will need to act quickly and look beyond the big banks. A handful of low-cost lenders and smaller credit unions still offer relatively competitive fixed rates, but it’s unlikely that these remain for a long time.

“The variable rate market is a whole different story. Banks big and small continue to scramble to give discounts to ideal customers, mostly existing borrowers ready to jump ship from a competitor,” she said.

BIG FOUR BANKS: the lowest rates

Rate type ABC Westpac NAB ANZ
1 year fixed

4.99%

4.09%

4.69%

4.69%

2 years fixed

5.79%

4.79%

5.59%

5.49%

3 years fixed

6.39%

5.19%

5.79%

5.89%

4 years fixed

6.59%

5.29%

6.19%

5.99%

5 years fixed

6.69%

5.39%

6.29%

6.09%

Lowest variable

2.79%

2.64% for 2 years then 3.04%

2.94%

2.79%

Source: RateCity.com.au. Rates are for homeowners who pay principal and interest. Certain LVR requirements apply.

Lowest mortgage rates on RateCity.com.au

Rate type Lender Advertised price
1 year fixed First option bank

2.99%

2 years fixed Capricorn

3.39%

3 years fixed National Bank of Queensland

4.29%

4 years fixed QBANK

4.79%

5 years fixed IMB Bank

4.89%

Lowest variable Homestar Finance, Credit Union SA

2.44%

Source: RateCity.com.au. Rates are for homeowners who pay principal and interest. Certain LVR requirements apply.

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