$760 extra a month: the total impact of another 0.50% RBA hike

The RBA is tipped to hike the cash rate again tomorrow by 0.50 percentage points, taking it to 2.85 per cent, the highest rate since April 2013.

If the RBA hikes by 0.50 percentage points tomorrow, as forecasted by three of the big four banks, RateCity.com.au analysis shows the average borrower could be paying $760 more a month than they were before hikes started in May.

0.50% HIKE: Increase in monthly repayments

Source: RateCity.com.au. See notes below.

0.25% HIKE: Increase in monthly repayments

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

How many more RBA rate hikes are ahead?

Just how high the cash rate will go remains a contentious issue. CBA believes it will peak at 2.85 per cent, while Westpac expects the cash rate will peak at 3.60 per cent.

Big four bank cash rate forecasts

• CBA: +0.25% in Oct, peaking at 2.85% in Nov. Two 0.25% cuts in Aug and Nov 2023.
• Westpac: +0.50% in Oct, peaking at 3.60% in Feb 2023. Four 0.25% cuts in 2024.
• NAB: +0.50% in Oct, peaking at 3.10% in Nov.
• ANZ: +0.50% in Oct, peaking at 3.35% in Dec. Two 0.25% cuts in 2024.

How much could monthly repayments rise in total if these forecasts are realised?

Analysis from RateCity.com.au shows the average borrower’s monthly repayments could rise in total by between $760 - $984, based on the big four banks’ cash rate forecasts.

Loan sizes are based on a borrower’s debt at the start of the hikes, calculating the total increase from 1 May to each peak.

Total increase to repayments 1 May 2022 to peak on big four bank forecasts

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 2.86% in April 2022 and big four bank cash rate forecasts are applied.

RateCity.com.au research director, Sally Tindall, said: “The RBA is almost certainly going to deliver its sixth consecutive cash rate hike. While it’s a difficult call as to how large it will be, another double hike is very much on the cards.”

“While the RBA Governor has indicated the Board is looking to slow down the size of the hikes in coming months, based on incoming data, October is unlikely to be the meeting it takes its foot off the accelerator,” she said.

“Data from APRA released on Friday shows deposits from households hit a new record high of $1.3 trillion, while retail sales also clocked up another rise according to the ABS.

“If the RBA pulls the trigger on yet another double hike, this would see the cash rate rise to its highest level in nine and a half years, while the average owner-occupier rate could soar to over 5.5 per cent.

“The average borrower may soon be paying an extra $760 a month in interest to their bank, at the same time their petrol and grocery bills continue to rise.

“Borrowers should realise there’s a two- to three-month lag between when the RBA hikes the cash rate and when this extra money comes out of their bank account.

“You might think you’ve successfully cleared five RBA hikes when really, you’ve only conquered three, potentially even two.

“Work out what your repayments will be after this latest hike, but also what they could get to if the cash rate hits 3.60 per cent.

“If you can, start making these higher repayments now, so you know ahead of time you can afford them. If you can’t, start making cutbacks today,” she said.

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