RBA CASH RATE JUMPED TO 0.85%
The Reserve Bank of Australia (RBA) at its June meeting has shocked the market with its decision to raise the official cash rate by 50 basis points to 0.85%. How much more should you expect to pay on your mortgage as a result of this?
RBA last month hiked the official cash rate from a record-low 0.10 percent to 0.35 percent, following two increases in as many months.
We hadn’t had a rate increase in more than ten years before then.
Normally, the RBA increases or lowers the cash rate by 0.25%.
However, according to the RBA’s governor, Philip Lowe, today’s larger-than-expected 0.50 percent cash rate increase is due to inflation in Australia having “significantly increased.”
“Given the current inflation pressures in the economy, and the still very low level of interest rates, the Board decided to move by 50 basis points today,” he said.
He added, “higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.”
How much more will each month’s mortgage payment be?
If you have a regular mortgage, the banks are likely to follow the Reserve Bank of Australia’s lead and raise your interest rate very soon – unless you’re on a fixed-rate mortgage.
The amount by which your payments will rise each month is determined by a variety of elements, including the particular bank’s reaction to the cash rate hike and the size of your loan.
Let’s assume you have a 25-year mortgage on a property worth $500,000 (which pays both principal and interest).
Your monthly payments may rise by about $133 a month, due to the 0.85% rate increase.
Repayments will most certainly rise by about $200 a month for every $750,000 loan and, for a million dollar loan, the monthly payment is expected to rise by $265 a month.
Concerned on your monthly repayments?
Chances are high we’ll see another RBA cash rate hike before the year is out.
In fact, the RBA has already made this point.
If you’re concerned about what a higher interest rate might imply for your monthly budget, don’t hesitate to contact Will Bell Mortgage Broker right away to learn more alternatives such as refinancing your home loan or locking a fixed-rate mortgage ahead of the possible future increases.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent