If the RBA cash rate hits 2.5% - how much more will you pay?

Australians with mortgages need to be prepared for their repayments to rise significantly, with the RBA signalling several more hikes are on the way.

Reserve Bank Governor Philip Lowe said yesterday the cash rate could rise to 2.5 per cent, although the timeframe to get there was not yet clear.

Big four bank forecasts: how high they predict the cash rate will go

The big four banks have all updated their cash rate forecasts following the RBA’s decision to hike by 0.25 percentage points yesterday.

• CBA: 1.60% by February 2023.
• Westpac: 2.25% by May 2023.
• NAB: 2.60% by August 2024.
• ANZ: 2.25% by May 2023.

Analysis from RateCity shows if the cash rate hits 2.60 per cent by August 2024, as forecast by NAB, someone with a $500,000 mortgage could see their monthly repayments rise by $675 compared to what they’re paying currently.

For someone with a $1 million mortgage, repayments could rise by a total of $1,350.

Extra monthly repayments compared to now if cash rate hits 2.60% by August 2024

NOTE: Calculations are based over 25 years.

Source: RateCity.com.au. Calculations are estimates and repayments are for an owner-occupier paying principal and interest over 25 years. Starting rate is the RBA existing variable customer rate of 2.92% and NAB’s cash rate forecasts are applied.

RateCity.com.au research director, Sally Tindall, said: “The May cash rate hike is just a taste of what’s to come from the RBA.”

“Whether you’re on a variable rate or a fixed loan that’s due to end, get ready to be paying a lot more,” she said.

“While most borrowers have decent buffers up their sleeves, for some people their rainy-day funds could shrink, and quickly, as the rate hikes continue.

“Some people, who think they’re going to scrape through, could suddenly find themselves in hot water in a blink of an eye.

“If you do, don’t panic. No matter what, do not put your head in the sand. Pick up the phone and tell your bank you may have trouble making your repayments.

“The national debt helpline is another good resource. They’re on 1800 007 007. They can put you in touch with a counsellor who can help you come up with practical ways to get on top of your repayments,” she said.

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