ABC passes on entire RBA interest rate hike

Treasurer Jim Chalmers said the country was strong enough to withstand a second consecutive 0.5 percentage point hike in official interest rates, economists said the RBA would follow up with a similar hike at its next meeting in August.

He said he spoke to Australian bank executives about the possibility of passing interest rates on to savers who have faced record returns for several years. While around 34% of households have a mortgage, more than three-quarters have savings.

“There is more pain on the way for variable home loan customers with another double hike set for next month. If that happens, it will be the biggest cash rate hike since 1994, when the RBA rose 2.75 percentage points in the space of five months.

Sally Tindall, Research Director of RateCity

If the Big Four banks passed on the rate hike in full, RateCity estimates that a homeowner with a $500,000 25-year mortgage would see their repayments increase by $137.

Someone with a $1 million mortgage will see an increase of $273 per month.

RateCity also estimated that if all banks passed on the full cash rate hike, the existing average floating homeowner rate would be 4.11%.

“When you combine the last three rate hikes, the average household with a $500,000 loan will see their monthly repayments increase by $333 in total. It’s like paying for an extra week’s worth of groceries and gas, every month,” RateCity research director Sally Tindall said Tuesday.

The RBA is expected to raise rates again in July.Credit:Pierre Braig

“There is more pain on the way for variable home loan customers with another double hike set for next month. If that happens, it will be the biggest cash rate hike since 1994, when the RBA rose 2.75 percentage points in the space of five months.

She said borrowers will need to prepare for a rate hike of 2.5 percentage points in total by early next year, potentially even higher.

“While raising interest rates is designed to lower inflation, it doesn’t happen overnight. It will take several months for the RBA to get inflation under control, which means that, for now, families will feel the heat on all fronts,” she said.

Last week, Commonwealth Bank increased fixed rate mortgages for one to five year loans by 1.4 percentage points and NAB quickly followed, increasing its fixed rate mortgages by 1.1 percentage points.

Loading

A study by financial comparison website Mozo published this week found that if the RBA raised the cash rate by 50 basis points this week and lenders passed on the hike in full, the average floating rate would rise to 4.15% and the average of the big four banks the rate would exceed 4 percent.

It also found that 45% of mortgage holders said they would experience severe financial hardship when the interest rate on their home loan exceeded 4%.

Comments are closed.