Drumroll … The RBA has hiked the official cash rate for the 12th time since April 2022, increasing it to 4.10%. How much will this increase your monthly repayments? And how long does Philip Lowe plan to keep marching to this beat?
Another month, another 25 basis point cash rate rise. It’s now apparent the cash rate pause back in April was nothing but a false peak.
Reserve Bank of Australia (RBA) Governor Philip Lowe explained in a statement that while inflation in Australia had passed its peak, at 7% it was still too high and it would be some time yet before inflation was back in the 2-3% target range.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe,” he said.
Governor Lowe added that some further tightening of monetary policy may be required to ensure that inflation returned to target in a reasonable timeframe, but that would depend upon how the economy and inflation evolved.
“If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment,” Governor Lowe explained.
“Recent data indicate that the upside risks to the inflation outlook have increased and the Board has responded to this.”
How much could this latest hike increase your mortgage repayments?
Unless you’re on a fixed-rate mortgage, the banks will likely follow the RBA’s lead and increase 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 $76 a month. That’s an extra $1,135 a month on your mortgage compared to 3 May 2022.
If you have a $750,000 loan, repayments will likely increase by about $114 a month, up $1,702 from 3 May 2022.
Meanwhile, a $1 million loan will increase by about $152 a month, up about $2,270 from 3 May 2022.
Concerned about how you’ll meet your repayments?
A lot of households around the country will now be feeling the pain of these 12 rate rises. So if your household is one of them, know that you’re not alone.
Similarly, there are likely a lot of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends.
Whatever your situation, please know that there are options we can help you explore.
Some of those options might include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.
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.
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