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The average borrower has shelled out almost $25K extra since the start of the hikes

Eden Radford avatar
Eden Radford
- 6 min read
The average borrower has shelled out almost $25K extra since the start of the hikes

New research from RateCity.com.au shows the average borrower who hasn’t refinanced has paid more than $24,000 extra in interest as a result of the RBA rate rises over the last twenty months.

While there is little expectation the RBA will hike the cash rate today at its last meeting for the year, borrowers have already been hammered by the thirteen rate rises in 2022 and 2023 which the RBA had previously said were not likely until 2024.

The research shows the average borrower with a $500,000 loan at the start of the hikes will have paid an estimated $24,598 more in interest charges in the twenty months between May 2022 and December 2023. This assumes the borrower has not refinanced or renegotiated their loan in this time.

Estimated interest paid: May 2022 – December 2023

Based on an owner-occupier with a $500K loan at start of hikes

RateInterest paid (May 2022 - December 2023)
If rates had remained the same2.86%$23,252
Rate rises in line with cash rate2.86% - 7.11%$47,850
Differenceup to 4.25% pts$24,598

Source: RateCity.com.au. Assumes borrower is paying principal and interest and has 25 years remaining at the start of the hikes.

All big four banks in tune for a hold in December – but not for February

All of the big four bank economic teams are forecasting a hold for the RBA’s December meeting today.

CBA, Westpac and ANZ all believe we are at the peak of the cash rate at 4.35 per cent. NAB, however, is forecasting one more hike in February, to 4.60 per cent.

Big four bank current cash rate forecasts

BankCash rate peakFirst cut
CBA4.35%Q4 2024
Westpac4.35%Q3 2024
NAB4.60% (Feb, 2024)Q4 2024
ANZ4.35%Q4 2024

Source: RateCity.com.au

Should the Board raise the cash rate by 0.25 percentage points to 4.60 per cent, the average borrower with a $500,000 debt at the start of the hikes will see an additional $76 added to their monthly mortgage repayments, and a total increase across what would then be 14 hikes to $1,287. This assumes they have not renegotiated their loan in this time.

Impact of a 0.25%-point hike: increase to monthly repayments

Loan size at start of hikes0.25%-point increase to 4.60%Total increase across 14 hikes
$500,000$76$1,286
$750,000$114$1,929
$1,000,000$152$2,572

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA avg. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

Refinancing or haggling the key to enjoying the summer

With rates likely to remain high for the majority of 2024, borrowers should seek out rate relief for themselves over summer.

While the cash rate has risen by 4.25 percentage points since May 2022, the RateCity.com.au database shows there are still at least 26 lenders offering rates under 6 per cent, excluding introductory loans.

Lowest rates on RateCity.com.au

Of those that have announced their November cash rate hikes

LenderLowest advertised variable rate
Abal Bank5.75%
Illawarra Credit Union5.79%
Northern Inland Credit Union5.84%
Regional Australia Bank5.87%
Auswide Bank5.89%

Source: RateCity.com.au. Rates are for owner-occupiers paying principal and interest. LVR requirements apply. Excludes introductory rates.

If the average borrower, who has yet to negotiate their rate, refinances to a new loan at 6.00 per cent, they could potentially save almost $10,000 over two years, even when factoring in estimated switch costs of $1,150.

How much could you save by refinancing your loan over summer

Based on an owner-occupier switching from 7.11% - 6%

Loan size at start of hikesDrop in monthly repaymentsSavings – next 2 years
$500,000$330$9,558
$750,000$495$14,912
$1,000,000$660$20,266

Source: RateCity.com.au. Note: based on an owner-occupier paying principal and interest with 25 years remaining. Assumes rates move in line with ANZ’s cash rate forecast.

RateCity.com.au research director Sally Tindall, said: “Another cash rate pause does not mean people can let the budget go rogue over summer.”

“The RBA has made it clear another rate hike is not out of the question. A prolonged spell of elevated spending could ruffle inflation, and push the Board back into hiking territory,” she said.

“COVID was tough on many families, but 2023 has been even harder financially for a lot of Australians who have had their back up against the wall due to the RBA hikes.

“The RBA did not expect the size and scale of the hikes it ended up delivering in the last year and a half, and nor did millions of borrowers across the country.

“The cash rate is a hammer not a chisel. Some households have slipped through relatively unscathed while others have moved from physical lockdown to financial lockdown.

“Borrowers should spend time over the holidays setting themselves up for 2024 by refinancing to a different lender.

“The latest ABS statistics show just over 671,000 loans have been refinanced since the start of the hikes. This means there are millions that haven’t yet made the switch.

“If you haggle with your bank, there’s a strong chance you’ll walk away with a decent rate cut in the space of one or two phone calls, but know if you accept that offer, you could be selling your finances short by not refinancing.

“The lowest rates are often reserved for new customers, so if you want the best BBQ brag this summer, you may need to go the whole hog and refinance.

“The banks are increasingly advertising home loan applications in as little as 10 or 15 minutes. That can sometimes be the difference between finding a Rockstar park at the beach and one that’s a few streets away,” she said.

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Product database updated 21 Jul, 2024

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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