Yet another double hike on the cards: repayments could lift by 33% since start of May

The Reserve Bank is set to hike the cash rate for the sixth month in a row on Tuesday, in a further bid to rein in inflation.

The Board will be deciding between a 0.25 and a 0.50 percentage point hike, with a half a percentage point hike the most likely option.

If the RBA hikes by 0.50 percentage points, the cash rate will rise to 2.85 per cent – the highest level since April 2013 and the fifth double hike in as many months.

If this happens, the average variable borrower could see their monthly repayments rise by another $148.

However, the RBA has hiked five 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 $760 – a 33 per cent increase since the start of May.

0.50% HIKE: Increase in repayments

Calculations are for existing customers and based over 25 years

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 $74 a month, with a total increase from the start of May to October of $687.

0.25% HIKE: Increase in repayments

Calculations are for existing customers and based over 25 years

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

However, the rate hikes are not expected to end next week. Westpac’s economic team has increased its cash rate forecast. It now expects the cash rate will peak at 3.60 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 $984 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

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.

RateCity.com.au research director, Sally Tindall, said: “The Reserve Bank will be weighing up a 0.25 and a 0.50 percentage point rate increase on Tuesday, with another double hike the most likely outcome.”

“If this happens, the cash rate will hit the highest level in nine and a half years,” she said.

“As a result, the average owner-occupier could see their repayments increase by a third, with more hikes still to come.

“The Board has indicated it will dial back the size of the hikes in coming meetings, however, October is unlikely to be the month it does this.

“While data out today from the ABS has recorded a slight drop in annual inflation, this was largely due to a decline in petrol prices in August. However, the end of the fuel excise cut will see prices rise from next week.

“Borrowers should keep track of their repayments and prepare for more hikes to come. For many families, the August and September rate hikes are still yet to hit their bank accounts, with more likely to be in the pipeline.

“Add on top of this the end of the fuel excise cut and the continued rise in everyday expenses and things could really start to snowball for some families.

“If you think you’ll feel the strain on the budget, start making cutbacks now so you’re in a better position when rate hikes really start to hurt,” she said.

Lowest variable rates on RateCity.com.au

From lenders which have announced September RBA hikes.

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

Source: RateCity.com.au Rates are for owner-occupiers paying principal and interest. LVR requirements may apply

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