Mortgage holders are once again left holding the bag on Melbourne Cup Day with the RBA lifting the cash rate to 4.85%, its highest level in 18 years. If your repayments are starting to bite, here’s how we could help you rein in your interest rate.
Following hikes in February, March, May and September, this latest 0.25% increase takes the cash rate to 4.85%, a level we haven’t seen since November 2008. Not exactly a prosperous time.
The RBA’s Monetary Policy Board said in a statement that AI-related investments, conflict in the Middle East, and higher fuel prices were putting upwards pressure on inflation.
“Many firms are experiencing cost pressures and are either increasing the prices of their goods and services in response or looking to do so,” the Board said of its 6-3 split decision vote to increase the cash rate.
The Board added that inflation is now forecast to remain elevated through much of 2027 and is not expected to reach the 2-3 percent target range until late 2027 – about three quarters later than previously forecast.
“The Board will continue to do what it considers necessary to bring inflation sustainably back to target,” the RBA statement said.
How could this affect your mortgage repayments?
Unless you’re on a fixed-rate mortgage, your bank will likely soon follow the RBA’s lead and increase the interest rate on your variable home loan.
For an owner-occupier with a 25-year loan of $500,000 paying principal and interest, this month’s 25 basis point rate hike means your monthly repayments could increase by about $77 a month.
That equals about $924 a year. Or $4620 annually if you also include the other four rate hikes.
If you have a $750,000 loan, your minimum monthly mortgage repayments may increase by about $115 a month. That’s $1380 per year, or $6900 including the previous four rises.
Meanwhile, a $1 million loan could go up by about $154 a month. That’s $1848 a year, and $9240 if you include the February, March, May and September hikes.
This all assumes that your lender automatically passes on the full 25 basis point increase to your home loan.
When did you last refinance your home loan?
This fifth RBA rate hike in nine months will be a very tough pill to swallow for mortgage holders on a variable rate. It hurts, but there are still some steps you could potentially take to help offset the rate hike.
If it’s been some time since your last home loan review, now might be a good time to check in.
There’s a chance you might be able to improve your situation by switching to a lender with a lower-rate home loan – potentially giving you a rate cut of your own.
Other options we could help you explore include renegotiating with your current lender, switching to interest-only for a period of time, or debt consolidation.
Every household is unique, and we’re committed to helping you find a solution that fits your needs.
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