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- Another double hike likely on Tuesday: cash rate could hit highest level in almost 8 years
Another double hike likely on Tuesday: cash rate could hit highest level in almost 8 years
The Reserve Bank is set to hike the cash rate for the fifth month in a row on Tuesday, in another bid to curb inflation.
The Board is likely to be deciding between a 0.25 and a 0.50 percentage point hike, a half a percentage point hike being the most likely option.
If the RBA hikes by 0.50 percentage points, the cash rate will rise to 2.35 per cent – the highest level since December 2014.
If this happens, the average variable borrower could see their monthly repayments rise by $144, assuming banks pass on the hike in full to customers (see table below).
However, the RBA has hiked four times already. For an owner-occupier with a $500,000 debt at the start of the hikes and 25 years remaining on their loan, the total increase to their monthly repayments could be $614.
0.50% HIKE: Increase in repayments
Calculations are for existing customers and based over 25 years
| Loan size | Increase in repayments (Sept) | Total increase May – Aug + Sept @ 0.50% |
| $500,000 | $144 | $614 |
| $750,000 | $216 | $922 |
| $1 million | $288 | $1,229 |
Source: RateCity.com.au. See notes below.
If the RBA increases the cash rate by just 0.25 percentage points, their repayments will rise by approximately $72 a month, with a total increase from the start of May to September of $543.
0.25% HIKE: Increase in repayments
Calculations are for existing customers and based over 25 years
| Loan size | Increase in repayments (Sept) | Total increase May – Aug + Sept @ 0.25% |
| $500,000 | $72 | $543 |
| $750,000 | $107 | $814 |
| $1 million | $143 | $1,085 |
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.
However, the rate hikes are not expected to end next Tuesday. Westpac’s economics team predicts the cash rate could increase to 3.10 per cent by Christmas, and peak at 3.35 per cent by February next year, before dropping in 2024.
If this happens, the same borrower with a $500,000 loan at the start of the hikes could see their monthly repayments rise, in total, by $908 in less than 12 months.
Potential increase in repayments by Feb 2023
Based on an owner-occupier paying principal and interest with 25 years remaining
| Total increase in mthly repayments from the start of hikes | ||
| Loan size | End of 2022 (cash rate 3.10%) | Feb 2023 (cash rate 3.35%) |
| $500,000 | $834 | $908 |
| $750,000 | $1,251 | $1,362 |
| $1 million | $1,668 | $1,816 |
Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining on the average existing customer variable rate and assuming the hikes are passed on in full. Calculations are based on Westpac’s current cash rate forecast.
Source: RateCity.com.au, RBA. Notes: based on the average owner-occupier existing customer variable rate at start of hikes. Assumes customer does not refinance or re-negotiate in this time.
RateCity.com.au research director, Sally Tindall, said: “If the RBA pushes ahead with another double hike on Tuesday, the cash rate will hit the highest level since December 2014.”
“If this happens, the average owner-occupier with a variable mortgage could be paying an interest rate that’s over 5 percent,” she said.
“As a result, the average borrower would see their monthly repayments increase, in total, by more than $600. That’s a huge amount of extra money to stump up, month after month.
“The fastest rise to the cash rate since 1994 has seen property prices drop, as buyers’ borrowing capacity is shredded with every RBA hike, spooking owner-occupiers and investors alike.
“However, other parts of the economy have continued to defy the rate hikes. Retail sales in July chalked up another rise, while unemployment dropped to 3.4 per cent and household deposits hit another record high.
“The latest figures from APRA show household deposits grew by $19.5 billion in July to reach a record $1.29 trillion.
“While many households have been able to take these rate hikes in their stride, families should work out what their monthly repayments will rise to if the RBA hikes by another 1.5 to 2 percentage points.
“If you think your budget will struggle in the months ahead, don’t wait until the problem hits home, act now.
“Households that start making cutbacks now are likely to be in a much better position when the rate hikes really start to bite,” she said.
Lowest variable rates on RateCity.com.au
From lenders which have announced August RBA hikes.
| Lender | Advertised rate |
| P&N Bank | 3.24% |
| G&C Mutual Bank | 3.24% |
| Gateway Bank | 3.24% |
| Bank First | 3.34% |
Source: RateCity.com.au Rates are for owner-occupiers paying principal and interest. LVR requirements may apply
Lowest fixed home loan rates on RateCity.com.au
| Term | Lender | Advertised rate |
| 1-yr fixed | Police Credit Union | 3.99% |
| 2-yr fixed | The Capricornian | 4.49% |
| 3-yr fixed | Police Bank | 4.69% |
| 4-yr fixed | Westpac | 4.89% |
| 5-yr fixed | BOQ | 4.99% |
Source: RateCity.com.au Rates are for owner-occupiers paying principal and interest. LVR requirements may apply
Disclaimer
This article is over two years old, last updated on September 1, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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