Finance
Mortgage Repayments on the Rise Words: Vanessa Bragdon VB Home Loans
In the July meeting, the Reserve Bank of Australia (RBA) has increased the official cash rate by another 50 basis points to 1.35% amid continuing inflation pressures. How much will this third consecutive rate hike increase your monthly mortgage repayments?
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t the beginning of May, the cash rate was 0.10%.
How much more will this latest rate rise cost each month?
On the 5th July, it was increased by the RBA to 1.35% – the second double-barrel 0.50% hike in a row. Potentially, as you read this, there may have even been a further increase with economists predicting more rate rises to come.
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.
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RBA Governor Philip Lowe said in a statement that the cash rate rise was the result of high inflation, both in Australia and around the world. “Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role,” said Governor Lowe.
This month’s 50 basis point increase means your monthly repayments could increase by about $137 a month. If you have a $750,000 loan, repayments will likely increase by about $205 a month, while a $1 million loan is expected to cost an extra $273 a month.
If you’re worried about your monthly repayments, get in touch with your local broker.
“Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.”
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Let’s say you’re an owner-occupier with a 25year loan of $500,000 (paying principal and interest).
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But that’s just factoring in this month’s latest cash rate hike. Let’s take a look at how much more you can expect to pay moving forward, compared to when the cash rate was 0.10% in April.
August 2022
For a $500,000 loan, you’ll likely be paying an extra $67 (May hike), $133 (June hike) and $137 (July hike) = $337 per month in interest repayments. For a $750,000 loan, you’ll likely be paying an extra $100 (May hike), $200 (June hike) and $205 (July hike) = $505 per month in interest repayments. For a $1,000,000 loan, you’ll likely be paying an extra $133 (May hike), $265 (June hike) and $273 (July hike) = $673 per month in interest repayments. If you’re worried about your monthly repayments, get in touch with your local broker. As you can see, unless you’re on a fixed rate, your monthly mortgage repayments will likely have gone up quite a bit since the end of April. So, if you’re starting to feel the pinch and are worried about what interest rate rises might mean for your monthly budget, get in touch with your local broker. Some options you can 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.
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