Exactly how much a hike in interest rates will cost you

The Reserve Bank of Australia is just hours away from potentially increasing the nation’s official cash rate, setting in place a process that will eventually impact the hip pocket of every borrower in the country.

Whether the RBA increases the cash rate – colloquially known as “interest rates” – at today’s meeting or next month in June, one thing is clear: mortgage repayments are going to get more expensive by the year’s end.

But by how much? That depends largely on the size of your loan:

Currently the majority of Australia’s economists are anticipating the RBA will raise rates by 0.15 basis points to bring the cash rate from 0.1 per cent to 0.25 per cent.

If this happens, the average owner-occupier with a $500,000 debt and 25 years remaining will see their repayments rise by $39.

If they increase by a more substantial 40 basis points – to 0.5 per cent – repayments on the same loan will rise by $104 a month.

RateCity.com.au’s research director Sally Tindall said while all eyes are on today’s interest rate announcement, the long term view is that rates will rise sooner rather than later and keep going.

“Borrowers should be aware the RBA is not going to stop at just one hike,” she said.

“The RBA is likely to lift the cash rate multiple times over the next six to 12 months as it works to bring inflation back under control.

“If the cash rate gets to 2 per cent by May next year, then someone with $500,000 owing on their loan today and 25 years remaining could be looking at a total increase to their monthly repayments of $511. 

“That’s going to be a lot for many borrowers to swallow, particularly anyone already struggling to make the monthly budget add up.”

Interest rates will continue increasing throughout 2022. (AAP)

Will a jump in interest rates cause to cut back on other household expenses? We want to hear from you. Get in touch with reporter Stuart Marsh at [email protected]

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The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

Reference-www.9news.com.au

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