A Melbourne Cup rate hike is a “near certainty,” with a 0.25-percentage-point increase the most likely outcome, according to RateCity research director Sally Tindall.
Fresh APRA data showed that household deposits hit a record $1.32 trillion in September – that’s up $12.99 billion month-on-month. New ABS retail sales figures, meanwhile, showed a 0.6% lift in September, which was slightly above market expectations but likely due to a rise in prices.
RateCity.com.au said neither of these sets of data will deter the Reserve Bank from hiking rates in an attempt to control inflation, which surged to 7.3% annually in the September quarter, the highest annual increase since 1990.
If the 0.25pp hike is realised, the OCR will rise to 2.85% – the highest level since the April 2013 meeting. This change that will see the average variable borrower pay an additional $74 monthly, assuming the banks pass on the hike in full to customers.
“The RBA won’t want to change tack back to 0.5-percentage-point hikes, but last week’s surprise inflation figures might prompt it to re-think its strategy,” Tindall said. “If the RBA hikes by 0.25 percentage points, the average borrower would see their monthly repayments increase by more than $700 since the start of the hikes – that’s a huge amount of money to shell out every month.
Here’s how borrowers’ monthly repayments would increase following a 0.25pp hike:
|
0.25% HIKE: Increase in repayments
|
||
|---|---|---|
|
Loan size
|
November increase
|
Total increase May-Nov
|
|
$500,000
|
$74
|
$760
|
|
$750,000
|
$112
|
$1,140
|
|
$1 million
|
$149
|
$1,520
|
Note: Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.
If RBA chooses to hike the cash rate by 0.5 pp today, the OCR will increase to 3.1% – the highest since the November 2012 meeting. See table below.
|
0.50% HIKE: Increase in repayments
|
||
|---|---|---|
|
Loan size
|
November increase
|
Total increase May-Nov
|
|
$500,000
|
$150
|
$834
|
|
$750,000
|
$225
|
$1,251
|
|
$1 million
|
$299
|
$1,668
|
Note: Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA average existing owner-occupier variable rate of 2.86% and assumes banks pass the cash rate hikes on in full.
The rate hikes are not expected to end today, with both Westpac and ANZ predicting the cash rate will surge to 3.85% in the first half of next year. If this happens, the same borrower with a $500,000 loan at the start of the hikes could see their monthly repayments rise by a $1,059 in less than 12 months, RateCity.com.au data showed.
