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Australians brace for another 0.25% RBA hike on Tuesday – how high will the cash rate go?
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The Reserve Bank is widely tipped to hike the cash rate again next week by 0.25 percentage points, taking it to 3.35 per cent – the highest rate in almost 10.5 years.
Another 0.25 percentage point rise would mean the average borrower with a $500,000 loan at the start of the hikes last May, could soon be paying a total of $908 more a month on their mortgage.
That’s a 39 per cent increase to their monthly repayments since the hikes began.
0.25% HIKE IN FEBRUARY: Increase in monthly repayments
Loan size | February increase | Total increase May-Feb |
$500,000 | $76 | $908 |
$750,000 | $114 | $1,362 |
$1 million | $152 | $1,816 |
Source: RateCity.com.au. See notes below.
How much could repayments rise in total?
CBA predicts there will be just one more hike on Tuesday, while Westpac and ANZ are still expecting three hikes in total in 2023.
Earlier this week, Deutsche Bank Australia updated its forecast and is now predicting a total of four RBA hikes this year, with the cash rate peaking at 4.10 per cent in August.
If this happens, analysis from RateCity.com.au shows the average borrower, with a $500,000 debt at the start of the hikes, could see their monthly repayments rise in total by $1,134 in 16 months – a 49 per cent increase.
Total increase to repayments 1 May 2022 to peak
Loan size | CBA Cash rate 3.35% | Westpac Cash rate 3.85% | NAB Cash rate 3.60% | ANZ Cash rate 3.85% | Deutsche Bank Aus Cash rate 4.10% |
$500,000 | $908 | $1,058 | $983 | $1,058 | $1,134 |
$750,000 | $1,362 | $1,587 | $1,474 | $1,587 | $1,701 |
$1 million | $1,816 | $2,117 | $1,966 | $2,117 | $2,268 |
Source: RateCity.com.au. Calculations are estimates and repayments are for an owner-occupier paying principal and interest over 25 years. Loan sizes are based on a borrower’s debt at the start of the hikes and assumes the borrower does not renegotiate their loan in this time.
RateCity.com.au research director, Sally Tindall, said: “Borrowers are looking at the ninth hike in as many meetings, taking the cash rate to the highest level since September 2012.”
“For the average existing owner-occupier, this could see their mortgage rate climb to over 6 per cent and their monthly repayments rise by just under 40 per cent since the start of May,” she said.
“While the barrage of hikes isn’t over, we are starting to see some encouraging signs these cash rate hikes are finally packing a punch.
“The latest retail trade figures for December from the ABS show a 3.9 per cent drop from the previous month in seasonally adjusted terms. This pull back in spending might not be music to retailers’ ears, but it will be for the RBA.
“It’s exactly what the Board wants to see – it just took a lot longer than expected.
“That said, the RBA won’t be blowing the full-time whistle based on a couple of months’ worth of data. Inflation might have peaked, but it’s not going to dutifully drop back down to below 3 per cent without further intervention.
“While economists are split on just how high rates will climb, next week could be the first of up to four more rate rises this year.
“A cash rate starting with a ‘4’ might still be an outside chance, but people should plan for the possibility.
“If you’ve got a mortgage and are worried about rising rates then do a stress test on your loan. Work out how high your repayments would go if the cash rate hits 4.1 per cent and make sure you have the spare cash to clear it on your current budget.
“When it comes to paying the mortgage, it’s far better to be overprepared than to come up short,” she said.
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Product database updated 08 Sep, 2024
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