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# Cash rate to rise tomorrow: how many RBA hikes can you avoid by refinancing?

Laine Gordon

The Reserve Bank is set to fire off another cash rate hike tomorrow, with a 0.50 percentage point increase the most likely outcome.

As RateCity.com.au noted on Thursday, a 0.50 percentage point hike will see the average variable borrower’s monthly repayments rise by \$144, assuming banks pass on the hike in full to customers (see table below).

However, a rate hike tomorrow will be the fifth time the Board has lifted rates since May. For an owner-occupier with a \$500,000 debt at the start of the hikes and 25 years remaining on their loan, the total increase to their monthly repayments could be \$614.

0.50% HIKE: Increase in repayments (impact of 0.25% hike at end)

Calculations are for existing customers and based over 25 years

 Loan size Increase in repayments (Sept) Total increaseMay – Aug + Sept @ 0.50% \$500,000 \$144 \$614 \$750,000 \$216 \$922 \$1 million \$288 \$1,229

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

### How many hikes can you prevent by refinancing?

The rate hikes aren’t likely to end tomorrow. Westpac is forecasting the cash rate will get to 3.35 per cent by February next year – a total increase from today of 1.50 percentage points.

The average existing variable owner-occupier borrower is paying 4.61 per cent, while the lowest variable rate is currently 3.24 per cent.

If this borrower refinanced to the lowest rate, they would be pocketing a 1.37 percentage point rate cut, mitigating the vast majority of these forecasted hikes. This assumes lenders pass on future rate hikes in full.

Source: RateCity.com.au, RBA, based on Westpac’s cash rate forecast.

RateCity.com.au, research director, Sally Tindall said, “While we’re likely to be well over the half-way mark, the RBA has at least two, but potentially as many as five, rate hikes still in its sights.”

“The average borrower could see their variable rate rise to over 6 per cent in a matter of months, unless they take action,” she said.

“People on a variable rate might feel powerless right now, but that doesn’t have to be the case. Refinancing to a more competitive rate will help mitigate future RBA hikes.

“Switching to the lowest variable rate might seem like hard work but it can translate into over \$6000 in savings in the first year alone, for someone with a \$500,000 loan and 25 years remaining.

“Don’t wait until the cash rate hits 3.35 per cent. Act now, because the sooner you refinance, the more money you’re likely to save,” she said.

0.25% HIKE: Increase in repayments

Calculations are for existing customers and based over 25 years

 Loan size Increase in repayments (Sept) Total increaseMay – Aug + Sept @ 0.25% \$500,000 \$72 \$543 \$750,000 \$107 \$814 \$1 million \$143 \$1,085

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

Lowest variable rates on RateCity.com.au

From lenders which have announced August RBA hikes.

 Lender Advertised rate P&N Bank 3.24% G&C Mutual Bank 3.24% Gateway Bank 3.24% Bank First 3.34%

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

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Product database updated 15 Jun, 2024

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