Mortgage holders’ eyes are turned nervously towards August, when the Reserve Bank could elect to increase interest rates once again after a recent inflation increase.
Data released yesterday by the Australian Bureau of Statistics showed the consumer price index hit 4 per cent for May, a marked jump after April’s 3.6 per cent, and above the predicted 3.8 per cent the market had predicted.
It’s the highest the CPI has been since November last year, when it reached 4.3 per cent.
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Although another round of inflation data will be published prior to the RBA’s meeting on August 5-6, there are some indications another cash rate rise – the 14th since May 2022 – could be on the cards.
Finance comparison website Compare The Market has crunched the numbers to show how much more mortgage holders could expect to pay if the bank lifts the cash rate by 25 basis points – a total of 4.6 per cent.
A homeowner with a $500,000 mortgage could face an estimated $82 monthly repayment increase, rising to $98 for a $600,000 mortgage, and $123 a month for a $750,000 mortgage.
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Somebody with $1 million mortgaged would have to raise an estimated $164 a month to make payments.
Compare the Market found that since rate rises began in May 2022, somebody with a $500,000 mortgage has already had an extra $1293 added to monthly repayments, compared to a $1552 rise for a $600,000 mortgage, and a $1940 rise for a $750,000 mortgage.
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Compare the Market economic director David Koch said that any further rate hikes would come as an enormous blow to families who had been holding out for reductions this year.
“If rates were to rise again, it would be a very tough end to the year for families who may already be experiencing mortgage stress,” Koch said.
“There’s a whole generation of borrowers who have never experienced rates this high, but also have sizeable debts due to the steep rise in house prices since the pandemic.
He said the RBA had warned that inflation had been stickier than expected, “so homeowners really can’t bank on interest rates coming down any time soon”.
“The message is clear: don’t wait for the RBA to move on rates,” he said.
“Start comparing home loans now and see if you could create your own rate cut by switching to a better offer.”
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