July rate hikes kick in tomorrow, but borrowers may not feel the pain for weeks

CBA, NAB and ANZ will lift all variable mortgage rates by 0.50 percentage points tomorrow, following the RBA’s July double rate hike, with Westpac rates increasing from next Wednesday.

As a result, the average variable borrower will see their rate rise by 1.25 percentage points since the start of May.

For someone with a $500,000 mortgage in May, with 25 years remaining, their repayments will rise by an estimated $333 in total across the three hikes.

Increase in monthly repayments for the average variable rate customer

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA average existing owner-occupier variable rate of 2.86% at the start of May.

While variable rate borrowers with loans with CBA, NAB and ANZ will be charged a higher interest rate from tomorrow, their monthly repayments will take weeks to rise.

In fact, many variable customers are only now seeing an increase in their monthly repayments as a result of the first hike back in May.

This is because banks typically give customers a minimum of 20 to 32 days’ notice before increasing their monthly repayments, despite the fact customers are being charged the higher rate from the effective date.

Even then, the increase to their monthly repayment might not take effect for another few weeks, depending on when they are due.

Big four banks’ minimum notice periods for rate rises for principal and interest customers:

• CBA: at least 20 days’ notice from the date of customer’s notification letter.
• Westpac: at least 30 days’ notice from the date of letter.
• NAB: at least 32 days’ notice from the date of letter.
• ANZ: at least 30 days’ notice from the date of letter.

RateCity.com.au research director, Sally Tindall, said: “The RBA’s rapid fire rate hikes have rattled consumer sentiment for months. However, it’s yet to show up in official retail spending data.”

“Part of this could be because homeowners have only just started paying extra on their mortgage as a result of the first hike back in May,” she said.

“The latest surveys from Westpac and ANZ show that confidence is in free fall on the back of rising inflation and interest rates.

“However, people are still opening up their wallets at the shops, although this is unlikely to last for long,” she said.

The latest ABS retail spending data for May recorded a monthly rise of 0.9 per cent, up 10.4 per cent year-on-year, however, NAB is now predicting a slight drop in June.

“While its great to see the banks giving their customers plenty of notice, any borrowers with their heads deliberately in the sand might get a shock when the higher mortgage repayments start coming out of their bank accounts.

“If you’re got a variable mortgage, pay close attention to the letters and emails your bank sends you. They should have your new mortgage repayments clearly listed, and the effective date.

“People with direct debits set up should make sure they’ve got enough money in their account to clear it.

“We expect the new lowest rate to be 2.84 per cent once all the hikes are announced, so if you suspect you’re overpaying then now is the time to refinance before rates keep climbing,” she said.

Big four bank home loan rates – POST JULY HIKE

Source: RateCity.com.au Notes: Home loan rates are for owner-occupiers paying principal and interest, LVR restrictions may apply. CBA, NAB, ANZ rates effective 15 July, Westpac rates effective 20 July.

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