Cash Rate Decision February 2023: RBA Raises Cash Rate To 3.35%

Cash Rate Decision February 2023: RBA Raises Cash Rate To 3.35%

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The Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points today, taking it to 3.35%.

How Does The Cash Rate Increase Affect My Interest Rate?

Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers. So if you have a variable interest rate, it will almost certainly go up with the cash rate increase.

How Much Is My Monthly Repayment Going to Increase?

The following chart shows how much the extra quarter percentage point in interest will cost homeowners, based on the size of their loan. (These example loan repayments were determined using our repayment calculator, based on the lowest variable rate we can offer over a 30-year term, as of 7 February 2023. Rates are subject to change from this date.)

How Many Times Will The Cash Rate Increase In 2023?

In his statement on the RBA’s decision, Governor Dr Philip Lowe said to expect further increases in interest rates over the coming months to ensure inflation returns to target. The RBA will keep a close eye on developments in the global economy, household spending trends and the outlook for inflation and the labour market. Home Loan Experts CEO Alan Hemmings said, “Inflation is still well above the target for the Reserve Bank and although we are yet to see the impacts of the increases over the last nine months, the Reserve Bank is saying it still needs to do more. “It is expected that all lenders will pass on the 0.25 percentage point increase, meaning the best variable interest rates available will be close to 5%. The biggest issue for all customers to be aware of is servicing. With the required buffer at 3 percentage points, most lenders will be completing calculations with a mortgage interest rate of 8%, this significantly reduces the borrowing power of customers. “For those customers who have a fixed rate that is due to expire, being aware of what interest rates are available in the market is very important. Also, read the fine print on advertising. We are seeing a number of lenders offer supposedly cheap rates”, but the fine print details further increases. In an effort to attract new business, the lenders are slowing their cycle for passing on any interest rate hikes to new customers.” Home Loan Experts General Manager Bhisan Raj KC said, “There is some uncertainty around inflation but most of the big four banks have predicted at least two more rises. NAB expects two more, while ANZ and Westpac believe the cash rate will peak in May. Meanwhile, CBA predicts that there will be a pause until the next inflation report. The cash rate hikes have now surpassed the 3 percentage-point buffer that banks use to assess borrowers, so customers will need to review their living expenses, cut down on a few things, and speak to their broker about negotiating better rates with their current lender or refinancing to a lower rate. They should keep in mind, however, that the economy does go through this cycle every now and then.” We’ve outlined more ways to prepare for an interest rate rise here. Home Loan Experts’ brokers can guide you through the right steps to prepare you for a rise in interest rates, whether through refinancing or simply managing your home loan more effectively. Call us on 1300 889 743 or complete our free online assessment form today.