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RBA hikes cash rate to 4.35%: what borrowers should do next

Eden Radford avatar
Eden Radford
- 6 min read
RBA hikes cash rate to 4.35%: what borrowers should do next

The RBA has today increased Australia’s cash rate to 4.35 per cent, the 13th hike since the start of May 2022 and the highest since November 2011.

In her statement, Governor of the Board Michele Bullock said: “returning inflation to target within a reasonable timeframe remains the Board’s priority”. However, in a departure from the Board’s usual language, the Governor said “whether” we would see more hikes would depend on the data.

For the average borrower with a $500,000 debt at the start of the hikes, today’s decision translates into a $76 increase to their monthly mortgage repayments.

Across all 13 hikes, their monthly repayments will rise in total by $1,210 – or 52 per cent. This assumes the borrower has not renegotiated their loan since the start of the hikes.

Impact of a 0.25%-point hike on monthly repayments

Loan size at start of hikes0.25%-point increase to 4.35%Total increase May 22-November 23
$500,000$76$1,210
$750,000$114$1,815
$1,000,000$152$2,420

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

If lenders pass on the 0.25 percentage point increase, as expected, the average owner-occupier who hasn’t renegotiated their loan since the start of the hikes will be on a rate of 7.11 per cent.

However, Australians do not need to cop a rate this high. RBA data shows many borrowers have refinanced or negotiated a rate cut from their lender, with the average owner-occupier rate at 6.18 per cent.

What borrowers should do now

The first thing borrowers should do is call their lender and ask for a rate cut.

The second thing borrowers should do is prepare for the RBA to lift rates again.

While all big four bank economic teams currently see this as the peak of the tightening cycle, the RBA has warned it will hike again if required to bring in inflation.

Therefore, borrowers should plan for at least one more hike – in addition to today’s increase.

What will be a competitive rate when the rate hike has been passed on?

If the big four banks pass this rate hike on in full, as they have done for the previous 12 hikes, the average new customer rate on the banks’ basic variable loan will be 6.55 per cent.

However, RateCity.com.au estimates there will be over 20 lenders offering variable rates under 6 per cent, the majority of which will be reserved for owner-occupiers, and a very small handful of lenders still offering variable rates under 5.85 per cent for refinancers (excludes introductory rates).

Estimated variable rates – post November hike (assumes lenders pass the increase on in full)

Estimated new variable rates
Average owner-occupier who hasn’t haggled7.11%
Average big four basic variable rate6.55%
Competitive variable rate (estimated over 20 lenders)under 6%
Ultra-competitive variable rate (estimated 3 lenders)under 5.85%

Source: RateCity.com.au. Note: Big four bank average includes Westpac’s introductory rate. LVR requirements apply. Excludes first home buyer loans.

How much could borrowers save by refinancing?

RateCity.com.au research shows if the average owner-occupier who hasn’t renegotiated their loan since the start of the hikes, refinances from a rate of 7.11 per cent to one of the big four banks’ basic variable rates, they could save up to $177 a month, and over $5,500 over two years.

If that borrower refinanced to a rate of 6 per cent, they could save almost $10,000 over two years. And, if they are eligible for an ultra-competitive rate at 5.85 per cent, they could save over $11,000 over two years, even when factoring in estimated switch costs of $1,150.

How much could you save by renegotiating your loan

Based on $500,000 debt with 25 years remaining - contact us for other loan sizes

RateDrop in monthly repaymentsSavings - next 2 years
Do nothing7.11%N/AN/A
Haggle to big four new customer rate6.55%$177$5,572
Refinance to a competitive rate6.00%$348$9,934
Refinance to one of the lowest rates5.85%$393$11,428

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 yrs remaining on their loan in April 2022. Assumes cash rate changes with ANZ forecast and that lenders pass on changes in full. Refinance options include switch costs.

RateCity.com.au research director, Sally Tindall, said: “We all knew it was coming, but this 13th hike is going to feel like a kick in the guts for many borrowers struggling to stay afloat.”

“Australia has made significant progress in the war against inflation since December of last year, but over the last couple of months, we’ve hit a road bump. The RBA isn’t willing to give inflation any more leeway over summer for it to turn into something bigger than a blip,” she said.

“Many families have struggled through winter under the weight of 12 hikes and a rising cost of living – only to come out the other side with yet another hike.

“While the big four banks typically take 10 to 14 days to charge variable borrowers higher rates, they give customers between two to three months’ notice before any extra money comes out of their bank account.

“This means today’s decision won’t hit most people’s budgets until 2024, giving households time to take matters into their own hands.

“Do not sit back and wait for your bank to announce it’s passing on the rate hike in full, and certainly don’t wait for that extra money to come out of your bank account before you do anything about it.

“Take action today by proactively asking for a rate cut and pre-emptively paying, not just for today’s rate increase, but at least one more.

“If today’s hike is the last straw for your finely balanced budget, call your bank and ask for help. It’s a call no one wants to make, but if you reach out early it could make all the difference.

“Don’t just stop at one call to your bank. Seek out some independent financial advice to help you map out your options,” she said.

Resources for people in financial stress:

· National Debt Helpline: 1800 007 007

· Good Shepherd no interest loans

· Services Australia Payment and Service Finder

State-based resources:

· Service NSW Savings Finder

· Service Victoria Savings Finder

· Queensland Govt Concessions Finder

· SA Govt Concessions Finder

· Concessions WA

· Concessions NT

· Tasmanian Govt Discounts and Concessions

· ACT Savings Finder

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Product database updated 16 Jun, 2024

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