The Reserve Bank of Australia (RBA) has hiked the official cash rate by another 50 basis points to 2.35%. Here's how much you can expect to pay on your mortgage going forward and how we could give you a helping hand.
This is the fifth month in a row the RBA has increased the cash rate, and the fourth straight double rate increase of 50 basis points.
It's also a seven-year high for the RBA cash rate.
RBA Governor Philip Lowe said in a statement that today's increase in interest rates will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy.
"The (RBA) board expects to increase interest rates further over the months ahead, but it is not on a pre-set path," said Governor Lowe.
It means a household with an $800,000 variable rate loan will pay an extra $1,000 a month than they were before the cash rate hikes at the start of May (with repayments going from $3300 up to $4300 in that time).
How much can you expect to pay on your mortgage from this month?
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 soon.
Let's say you're an owner-occupier with a 25-year loan of $500,000 paying principal and interest.
This month's 50 basis point increase means your monthly repayments could increase by about $140 a month. That's an extra $610 on your mortgage compared to May 1.
If you have a $750,000 loan, repayments will likely increase by about $215 a month, up $920 from May 1.
Meanwhile, a $1 million loan will increase $290 a month, up $1,230 from May 1.
How many more rate hikes are to come?
ANZ and Westpac are both forecasting the RBA cash rate will increase to 3.35% by November and February (respectively) next year.
So that's another two double cash rate (50 basis points) rises.
Commonwealth Bank and ANZ are a little more conservative with their predictions. They're tipping rates will hit 2.60% or 2.85% respectively, with just one more single or double rate rise left to go come November.
So where the cash rate lands could be somewhere around those four predictions.
Worried about your mortgage? Get in touch
Everybody's situation is different. So if you're starting to feel the pinch and are worried about what interest rate rises might mean for your monthly budget, feel free to contact us today.
Some options we can help you explore include refinancing (which could include increasing the length of your loan to decrease monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.
If you're worried about how you'll meet your repayments in the months ahead, give us a call today. We'd love to sit down with you and help you work out a plan moving forward.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.