The Reserve Bank of Australia increased the cash rate by 25 basis points, taking it to 2.60%.
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 lend 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 4 October 2022. Rates are subject to change from this date.)
Loan Amount
Before Increase (3.64%)
After Increase (3.89%)
Difference
$500,000
$2,284
$2,355
$71
$600,000
$2,741
$2,827
$86
$700,000
$3,198
$3,298
$100
$800,000
$3,655
$3,769
$114
$900,000
$4,112
$4,240
$128
$1 million
$4,569
$4,711
$142
How High Will Interest Rates Go?
Home Loan Experts CEO Alan Hemmings said inflation remains high and the RBA will want to see it slow before halting increases to the cash rate.
“For existing mortgage customers, the quarter-point increase means an additional $70 per month in interest costs on a $500,000 mortgage. At the moment, variable interest rates start between 3.5% and 4%. We expect these rates to increase. As always, existing customers should check what happens with their interest rate after the lender passes on any increase.”
A Buyer’s Market
Alan further commented, “On the property market, as prices continue to decrease, we are seeing fewer properties coming on for sale, and those on the market are taking longer to sell.”
“For buyers, this may present an opportunity as sellers get a better understanding of the value of their property and lower their expectations. Anyone looking to buy should be aware of their borrowing capacity, as constantly rising interest rates reduce customers’ buying power. Speaking to a broker is important so customers do not offer more than they can borrow.”
Our mortgage brokers can help you navigate the rate rise. Call us on 1300 889 743 or enquire for free online today.
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About the Author
Otto Dargan
Otto Dargan is the Founder of Home Loan Experts. He is involved in strategic and operational matters. He utilises his time in seeking...
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