RBA lifts interest rates yet again: How much will this one cost you?
The official cash rate is now at a decade-long high of 3.85%.
After a brief pause in April the Reserve Bank of Australia increased the official cash rate again today. The cash rate is now 3.85%, the highest it's been in a decade.
Only 55% of the experts in Finder's RBA cash rate survey predicted today's decision. This reflects growing uncertainty about how fast the RBA has lifted the cash rate, and comes as inflation is finally starting to slow down.
"Inflation in Australia has passed its peak," said RBA governor Philip Lowe, "but at 7 per cent is still too high and it will be some time yet before it is back in the target range."
How much will today's rate rise cost you?
Most lenders will pass today's rate rise onto borrowers in the next week or two. If you have a variable interest rate loan you can expect your interest rate to increase by 25 basis points.
Taking the average new home loan size and the lowest variable rate available on Finder right now, here's what the increase looks like:
Before today's rate hike
- Loan amount (30-year term): $586,366
- Current interest rate: 4.99%
- Monthly repayments = $3,145
After today's rate hike
- Loan amount (30-year term): $586,366
- New interest rate: 5.24%
- Monthly repayments = $3,235
That's an extra $90 a month, or $1,080 a year. This is just a simple example – your own situation will differ based on your interest rate and loan amount.
And for most borrowers, today's rate rise comes off the back 10 previous rises since this time last year. Most Australians with mortgages are paying thousands of dollars more in interest now than they were in early 2022.
What should borrowers do about today's rate rise?
Your lender won't increase your interest rate today. Keep an eye out for a letter or email over the next week or two to confirm your rate rise.
Then you have a few options:
- Do nothing. Rate rises are a fact of life, especially at the moment. And after 11 of them in a year, it's hard to keep on top of. But at the very least you should use a repayment calculator and check how much the rate rise will affect your repayments.
- Check your lender's website. Even though your lender is lifting your rate, there's nothing stopping it offering a better deal to new borrowers. Check to see you're getting the best possible rate from your lender. If not, call up and ask your lender to match.
- Consider refinancing. It's also a good idea to compare interest rates from multiple lenders. If your rate is no longer competitive, refinancing to a new loan could save you a lot of money. You might even be able to score a cashback for switching.
Need a better home loan? Check out some of the market's lowest rates.
