There is an increase in mortgage interest rates all across the country. This comes after the Reserve Bank of Australia (RBA) announced that they have raised the official interest rates to 1.35% (from a record low of 0.1% in April) as a countermeasure for the surging inflation.
Philip Lowe, governor of RBA, has warned borrowers to brace for impact as further hikes are to be expected in the effort of bringing inflation back into the target band. He also anticipates more rate rises in the coming months.
All of Australia’s biggest banks likely to lift mortgage rates
The four largest financial institutions in the country have yet to make announcements regarding their decision to lift mortgage rates. They are expected to do so this week.
Notably, the Commonwealth Bank (CBA) announced to increase their variable mortgage interest rates by 0.25% effective May 20.
The Australia and New Zealand Banking Group (ANZ) and the National Australia Bank (NAB) also notified their clients they will increase 25 basis points on their home loan products, both effective May 13.
Westpac followed suit on May 17.
Cash rate went up much sooner than predicted
In a previous blog that we published late last year, we shared our presumption of cash rates possibly going up in late 2022/early 2023, despite the RBA repeatedly announcing that they are not planning to raise the cash rate until 2024 at the earliest.
This was the popular observation at the time, with the strong economic recovery from COVID widely considered by many from the finance sector as the potential impetus for the rate surge.
The current rise of interest rates is expected to have a dampening effect on property prices. As borrowing costs go up, buyers are forced to set their sights on cheaper homes, while many may get discouraged and exit the market altogether.
How much an interest rate rise actually costs you
If you have a home loan, you may be wondering how the interest rate rises could affect your mortgage repayments.
Average monthly mortgage repayments have risen by 16% since April this year.
This means current interest rates will affect all households with a mortgage.
We have compiled a list of hypothetical figures that you can review to get a better idea on what to anticipate.
With a $500,000 mortgage, monthly repayments will increase about $362.
With a $750,000 mortgage, you will pay an extra $543 a month.
Households with a $1,000,000 mortgage will pay an extra $724 per month.
Here’s the caveat: these figures do not take into account your personal circumstances and loan terms. If you want a clear estimate of this rate rise’s impact on your loan repayments, it is best to chat with your financial adviser for further advice.
Talk to us
Every homeowner will be adversely affected by this economic setback. However, there are still good deals on the market that can potentially be better than what you have right now, despite the rise in interest rates.
You may want to consider getting a home loan health check to review your current home loan and find the best interest rates and features available to you. If you want to ensure you aren’t paying too much on your home loan, it will be in your best interest to work with a mortgage broker.
At Professional Lending Solutions, you won’t need to waste time doing extensive research — we can do the hard work for you by ensuring you get to see and compare all available options. We can also help you evaluate your financial circumstances if your lender has increased your repayment in light of the recent interest rate surge.
To get started, contact me on 0421 934 033.