Australians with a mortgage can breathe a little easier, with the Reserve Bank today sparing them a fourth consecutive rate hike that would have taken the cash rate to its highest level since 2011.
The previous three 0.25% increases have already added around $342 to monthly repayments on the average loan of around $736,000, adding up to an extra $4,128 a year.
A fourth hike would have lumped another $114 onto average monthly repayments. Combined with the earlier hikes, that would have added $5,472 to costs over the year.
Compare the Market’s Economic Director David Koch said the pause in hikes was good news for families struggling to adjust to higher costs across the board.
“I’ve been warning for months that Aussie households are being crushed and going into hibernation, and that’s bad for the economy,” Mr Koch said.
“Everyday life is costing more. There’s less left for groceries, expenses and even the little treats that make life enjoyable. We needed a break from the barrage of rising living costs.”
Impact of a potential rate rise on Australian mortgage repayments
| Loan size | Monthly impact of a 0.25% rate increase | Monthly impact of x2 0.25% rate increases (0.50%) | Monthly impact of x3 0.25% rate increases (0.75%) | Monthly impact of x4 0.25% rate increases (1%) |
| $500,000 | $79 | $158 | $239 | $320 |
| $600,000 | $94 | $190 | $287 | $384 |
| $750,000 | $118 | $237 | $358 | $480 |
| $900,000 | $142 | $285 | $430 | $577 |
| $1,000,000 | $157 | $317 | $478 | $641 |
| *Calculations assume an owner-occupied loan with a variable interest rate of 5.42% that is increased by 0.25% a month. It assumes a 30-year loan term, with no ongoing fees. This does not take into account the reduction of the loan balance over time. | ||||
Three of the big four banks — ANZ, NAB and Commonwealth Bank — aren’t expecting further hikes this year, and predict potential cuts on the cards in 2027.
Westpac is the outlier, forecasting up to two more 0.25% rate increases this year.
Whatever unfolds in the months ahead, Mr Koch urged Aussies to take control of their own fortunes by comparing and switching where cheaper rates are available.
“Everyone should be phoning their bank or broker to see if there’s a better offer out there,” Mr Koch said.
“We still hear about people on rates above 7% when we know there are rates available in the high 5s and low 6s.
“It might not look like much, but it could reduce your monthly repayments by hundreds of dollars — potentially saving you thousands over time.”
