CommBank’s big rate call

Posted: 25 November 2021 3:55 pm
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As well as predicting exactly when Australian property prices will fall and by how much, CommBank has come out with a cash rate forecast.

The cash rate determines how much you pay for your variable rate home loan. Right now, the cash rate is 0.1%, which is extremely low. This is why home loan interest rates are also extremely low.

When the cash rate increases, so does your home loan (if you have a variable mortgage).

And Gareth Aird, CBA's head of Australian economics, believes the cash rate is going to surge by over 1% over the next 2 years.

At the same time, he predicts property prices to fall by the end of 2023.

"The cash rate is forecast to lift because the economy will be at full employment and annual wages growth will have pushed to the desired level of 3%," Aird said.

He suggests the first cash rate increase, which usually happens in amounts of 0.25%, will be delivered by November 2022.

Here's what a 0.25% increase could add to your mortgage bill:

Mortgage amountExtra interest payable per monthExtra interest payable per year
$300,000$62.50$750
$500,000$104.16$1,250
$700,000$145.83$1,750
$1 million$208.33$2,500

And if, as Aird predicts, interest rates jump by a whopping 1.25%, here's how much more you could be paying:

Mortgage amountExtra interest payable per monthExtra interest payable per year
$300,000$312.50$3,750
$500,000$520.83$6,250
$700,000$729.17$8,750
$1 million$1,041.67$12,500

Get ahead of a huge rate hike: lock in your interest rate now for the next few years with a super low rate. Compare fixed rate offers now.

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