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After 11.5 years of cuts – are Australians ready for RBA rate hikes?
After more than a decade of interest rate cuts, the Reserve Bank is set to start hiking the cash rate as soon as tomorrow.
If the RBA hikes the cash rate by 0.15 percentage points the average owner-occupier with a $500,000 debt and 25 years remaining will see their repayments rise by $39. If the RBA hikes by 0.40 percentage points, as some economists are predicting, their repayments will rise by $104 a month.
However the rate hikes, if they happen tomorrow, are unlikely to stop there. Westpac is predicting the cash rate will rise eight times by next May, taking it to 2 per cent. If this happens, the same borrower could see their monthly repayments rise by $511 a month.
Impact on 25-year loan, if rates rise in May
Calculations are for existing customers, not new customers, and based over 25 years.
| Loan size | Mthly increase 0.15% increase | Mthly increase 0.40% increase |
| $300,000 | $23 | $63 |
| $400,000 | $31 | $84 |
| $500,000 | $39 | $104 |
| $600,000 | $47 | $126 |
| $700,000 | $55 | $147 |
| $800,000 | $62 | $168 |
| $900,000 | $70 | $189 |
| $1 million | $78 | $210 |
Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining on the average variable rate of 2.92%.
RateCity.com.au research director, Sally Tindall, said: “The RBA is poised to hike on the back of Australia’s shock inflation figures last week and it could come as early as tomorrow.”
“If official rates rise tomorrow, it’s likely to be a relatively minor increase of 0.15 percentage points. However, borrowers should be aware the RBA is not going to stop at just one hike,” she said.
“The RBA is likely to lift the cash rate multiple times over the next six to 12 months as it works to bring inflation back under control.
“If the cash rate gets to 2 per cent by May next year, then someone with $500,000 owing on their loan today and 25 years remaining could be looking at a total increase to their monthly repayments of $511.
“That’s going to be a lot for many borrowers to swallow, particularly anyone already struggling to make the monthly budget add up.
“Variable rate borrowers don’t have to take these RBA hikes lying down. If you haven’t given your mortgage a health check recently, now’s the time to do so.
“The average existing variable-rate customer is currently paying a rate of 2.92 per cent. Yet over 30 lenders are offering at least one variable rate under 2 per cent,” she said.
Lowest home loan rates on RateCity.com.au
| Rate type | Lender | Advertised rate |
| 1-yr fixed | Unity Bank | 1.84% |
| 2-yr fixed | Orange Credit Union | 2.45% |
| 3-yr fixed | Orange Credit Union | 2.99% |
| 4-yr fixed | Southern Cross Credit Union | 3.69% |
| 5-yr fixed | Australian Unity | 3.74% |
| Lowest variable | Reduce Home Loans, Homestar Finance, Pacific Mortgage Group | 1.79% |
Source: RateCity.com.au. Rates are for owner-occupiers paying principal and interest. Some LVR requirements apply.
Big four bank lowest rates for owner occupiers
| Rate type | CBA | Westpac | NAB | ANZ |
| 1-yr fixed | 2.99% | 2.79% | 2.99% | 3.29% |
| 2-yr fixed | 3.79% | 3.69% | 3.99% | 3.99% |
| 3-yr fixed | 4.19% | 4.19% | 4.49% | 4.39% |
| 4-yr fixed | 4.39% | 4.39% | 4.79% | 4.69% |
| 5-yr fixed | 4.49% | 4.59% | 4.99% | 4.89% |
| Lowest variable | 2.19% | 2.09% | 2.19% | 2.19% |
Source: RateCity.com.au. Rates are for owner-occupiers paying principal and interest. Some LVR requirements apply.
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Product database updated 21 Apr, 2024
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