The Reserve Bank is expected to make another cash rate hike today – the fifth time the board has lifted rates since May – with a 0.5 percentage point increase the most likely outcome.
RateCity.com.au said a 0.5 percentage point hike will see the average variable borrower’s monthly repayments increase by $144, assuming banks pass on the full hike to customers, which means an owner-occupier with a $500,000 debt at the start of the hikes and 25 years remaining on their loan, will see their monthly repayments increase by a total of $614.
The rate hikes aren’t likely to end today. In fact, Westpac is forecasting the cash rate will hit 3.35% by February next year – that’s a total increase of 1.5 percentage points from today.
The average existing variable owner-occupier borrower is paying 4.61%, while the lowest variable rate is currently 3.24%.
RateCity.com.au said that if this borrower refinanced to the lowest rate, they would be saving a 1.37 percentage-point rate cut, mitigating the vast majority of the forecasted hikes, assuming lenders pass on future rate hikes in full.
“While we’re likely to be well over the half-way mark, the RBA has at least two, but potentially as many as five, rate hikes still in its sights,” said Sally Tindall, RateCity.com.au, research director. “The average borrower could see their variable rate rise to over 6% in a matter of months unless they take action. People on a variable rate might feel powerless right now, but that doesn’t have to be the case. Refinancing to a more competitive rate will help mitigate future RBA hikes. Switching to the lowest variable rate might seem like hard work but it can translate into over $6,000 in savings in the first year alone, for someone with a $500,000 loan and 25 years remaining. Don’t wait until the cash rate hits 3.35%. Act now, because the sooner you refinance, the more money you’re likely to save.”
