Reserve Bank of Australia (RBA) Increases Cash Rate to 3.60%
Dale Henry • Mar 09, 2023
Official Cash Rate Rises to 3.60%
Whenever the RBA increase the cash rate, homeowners feel the squeeze, this week, the Reserve Bank of Australia (RBA) increased its official cash rate by 25 basis points.
The official cash rate in Australia has been raised by the RBA for the tenth meeting in a row, bringing it up to 3.60 percent. You might be wondering, how much will your monthly mortgage repayments increase as a result of this rate hike, and how many more rate increases are anticipated to occur in the future?
With the most recent action taken by the RBA, the cash rate has reached its highest level since May of 2012.
The language used by RBA Governor Philip Lowe regarding the timing of future rate hikes has been somewhat tempered, which is news that mortgage holders may take as a glimmer of hope.
This month’s announcement regarding the increase in interest rates did not include the comment he made the previous month, were he stated that “further increases in interest rates will be needed over the months ahead.”
Governor Lowe stated that the RBA will be “paying close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market” when determining whether interest rates need to be increased.
He stated, “The board is committed in its commitment to return inflation to target and will do whatever is necessary to achieve that, […] the board will do what is necessary to achieve that.”
What’s the bottom line? How much will my mortgage payments increase?
Your variable home loan’s interest rate will almost certainly go up very soon, unless you’re on a fixed rate loan.
If you’re a homeowner with a $500,000 loan that has a 25-year term and you’re paying principal and interest your monthly repayments are likely to increase by roughly $75 per month. However, if we compare this to May 2022, this is an increase of approximately $985
If you owe $750,000 on your loan, you can expect your payments to increase approximately $112 per month, making for a total increase of $1,478 since May 2022.
On the other hand, the monthly payment for a loan of $1 million will go up by around $150, resulting in an increase of approximately $1,980 as of May 2022.
What happens if the RBA continues to raise rates?
According to the projections of the big four banks, the cash rate will reach its highest point at either 3.85% (according to the CBA’s latest forecast) or 4.10%. (Westpac, ANZ and NAB) later this year.
If the cash rate were to reach 4.10 percent, the following is an estimate of how much more you would have to pay each month if you were an owner-occupier with a 25-year loan:
- The interest rate on a $500,000 loan will increase by approximately $75 every 25 basis points increase, bringing the total payment to $3,470 per month, an increase of approximately $1,135 since May 2022.
- The interest rate on a $750,000 loan will increase by approximately $75 every 25 basis points increase, bringing the total payment to $5,200 per month, an increase of approximately $1,700 since May 2022.
- The interest rate on a $1,000,000 loan will increase by approximately $75 every 25 basis points increase, bringing the total payment to approximately $6,950 per month, an increase of almost $2,300 since May 2022.
Concerned about your repayment? Call us today!
There is no way to refute the fact that a significant number of households all around the country are suffering as a direct result of these rate increases.
Many people who currently have house loans with fixed rates are curious about the alternatives that will be open to them once the period of their loans with fixed rates has ended. Many people are coming off very low fixed rates and are likely to be concerned about what to do next. The best thing you can do if you’re in this situation is to Call Us so we can plan for when you revert to a variable rate.
Refinancing (which might involve lengthening the length of your loan and cutting your monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of additional rate hikes are some alternatives that we can help you investigate.
Call Us now if you are concerned about how you will be able to keep up with your repayments in the future. The sooner we meet down with you and assist you in formulating a strategy, the more effectively we will be able to assist you in managing any future rate increases.
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