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RBA announces 7th cash rate hike – mortgages rise (again)


Monthly repayments could increase by around $91 for the average home loan borrower thanks to the RBA's cash rate announcement.

For the seventh month in a row, the Reserve Bank of Australia (RBA) has increased the national cash rate. The official cash rate now sits at 2.85%, the highest it has been since 2013.

After several months of rising rates, it will be no surprise that this likely means your variable mortgage rate will be rising too.

This is because banks and lenders assess their interest rates for things like home loans based on the national cash rate.

The cash rate has gone up by 25 basis points, which means that since May we've seen an increase of 275 basis points. Before the May announcement the cash rate had been sitting at a record low of 0.10%.

According to the latest figures, the average home loan size in Australia is $589,137. Assuming a 30-year loan term and the average variable rate for October on the Finder database of 5.20%, your repayments would be $3,235 a month.

Adding on today's cash rate increase, you'd be looking at an average interest rate of 5.45%. This would make your monthly repayments $3,326. That's an increase of $91 per month or $1,092 over a year.

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How far will rising interest rates go?

One of the reasons for the RBA increasing interest rates has been down to rising inflation. The latest figures hit a 32-year high of 7.3%: something you may have noticed in the guise of increasing prices across things like groceries, fuel and electricity bills.

Inflation has been rising fairly steadily since 2020 when it dropped to record lows during the first wave of the COVID-19 pandemic. It flew above pre-COVID levels in June 2021 and despite dropping back slightly in the following quarter, has continued to climb in the last year.

The RBA wants to keep inflation between 2% and 3%, and we're a little way off that. So, as long as inflation keeps rising, the RBA will likely keep increasing interest rates. That's because if people are spending more money on things like their loans, they'll be spending less money on discretionary spending. That in turn should bring down prices and, therefore, inflation.

It remains to be seen how long this will go on for, but in October the RBA predicted inflation to reduce to just about 4% throughout 2023 and then down to 3% over 2024. After 4 50-basis-point increases already this year, it is expected that the RBA will tread more softly moving forward.

What can you do if you're already struggling with mortgage repayments?

If rising interest rates on top of the rising cost of living are stretching your purse strings a little too tightly, there are some things you could consider:

  1. See how your lender responds to today's rate decision. Lenders don't always respond the same way and some wait days or weeks to pass on any rate rises. Your lender will notify you of any rate changes. Wait to see what your lender does and whether you can afford it.
  2. Put together a budget. Work out a comprehensive budget assessing your incomings and outgoings. Work out how much further you can be stretched, so you know how many more rate rises you can handle.
  3. Speak to your lender. Take a look at your lender's existing rates on offer to see if it's offering something lower for new borrowers. Then, give it a call and see if it can move you on to a better deal.
  4. Even if you can get a better deal from your existing lender, shop around. You should always compare rates elsewhere to see if you could be getting a better deal. However, as lenders do update their interest rates at different times, make sure the rate you're looking at is the one you'll be paying.
  5. Put your money in a high interest savings account. An increase in the official cash rate might mean a higher home loan rate, but it can also mean higher savings rates. Banks also base their savings interest rates on the cash rate, so take advantage of that and find a savings account with a good rate. You should be looking at savings rates above 4% now!

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