RBA strikes again: average mortgage rate to rise above 5%

The average variable rate borrower will soon be on a rate above 5 per cent following today’s 0.50 percentage point RBA hike.

The cash rate is now 2.35 per cent, the highest rate since the beginning of 2015. As a result, variable mortgage rates are rising sharply for both new and existing borrowers.

RateCity.com.au analysis shows that once this hike has been passed on by lenders:

Owner-occupiers:

• 5.11% will be the average existing customer variable rate for owner-occupiers.
• Under 4% will be a competitive variable rate for owner-occupiers paying principal and interest.
• About a dozen lenders are likely to have variable rates under 4%.

Investors:

• 5.46% will be the average existing customer variable rate for investors.
• Under 4.30% will be a competitive variable rate for investors paying principal and interest.
• About a dozen lenders will have investor variable rates under 4.30%.

Impact of today’s 0.50% RBA hike on existing variable rate customers

The average owner-occupier will see their monthly repayments rise by $144 in September, if their lender passes on today’s 0.50 percentage point hike in full.

If you combine the 2.25 percentage points of hikes since May, that’s an extra $614 a month for the average borrower, who had a $500,000, 25-year loan before the hikes began.

Impact of today’s RBA hike

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% and assumes banks pass the cash rate hikes on in full.

RateCity.com.au research director, Sally Tindall, said: “The average variable borrower will soon be on a rate of over 5 per cent – that’s getting close to double what it was five months ago.”

“This hike is going to pile even more pressure on households that are already struggling with the rising cost of living,” she said.

“If you’re an owner-occupier and your rate starts with a ‘5’ or even worse, a ‘6’, then do something about it. Haggle with your bank for a better deal or refinance to a lender willing to charge you less.

“We expect at least a dozen lenders will still be offering variable rates under 4 per cent once this hike filters through, but only for new customers.

“Already 25 lenders on our database have cut variable rates for new customers since the RBA hikes began in May. In fact, five banks including CBA and ANZ have lowered their rates twice in this time.

“People thinking about switching lenders should take stock of their financial situation to make sure they’re not in mortgage prison, unable to refinance.

“Rising rates and falling property prices will make refinancing more difficult for home-owners who bought with small deposits or borrowed at capacity,” she said.

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