June 27th 2024.
With August fast approaching, many homeowners are feeling uneasy as they wait to see if the Reserve Bank will once again raise interest rates. This comes after a recent increase in inflation, with data released by the Australian Bureau of Statistics showing that the consumer price index has hit 4% for the month of May. This is a significant jump from April's 3.6% and higher than the predicted 3.8%, causing concern among mortgage holders.
In fact, this is the highest the CPI has been since November of last year when it reached 4.3%. With another round of inflation data set to be released before the RBA's meeting on August 5-6, there are signs that another cash rate rise could be on the horizon. This would mark the 14th increase since May 2022, and it's no surprise that homeowners are worried about the impact it could have on their mortgage repayments.
According to a recent analysis by finance comparison website Compare The Market, a 25 basis point increase in the cash rate could result in a total interest rate of 4.6%. For a homeowner with a $500,000 mortgage, this would mean an estimated $82 increase in their monthly repayments. For those with larger mortgages of $600,000 or $750,000, the increase would be even more significant at $98 and $123 respectively.
For those with a $1 million mortgage, the impact would be even greater, with an estimated $164 added to their monthly repayments. And this is not the first time homeowners have had to deal with rate rises. Since May 2022, someone with a $500,000 mortgage has already seen an extra $1293 added to their monthly repayments, compared to $1552 for a $600,000 mortgage and $1940 for a $750,000 mortgage.
Compare The Market's economic director David Koch has warned that any further rate hikes would be a huge burden for families who were hoping for a break this year. He noted that there is a generation of borrowers who have never experienced such high interest rates, but also have significant debts due to the rise in house prices during the pandemic. With the RBA acknowledging that inflation has been higher than expected, it's unlikely that interest rates will come down anytime soon.
Koch's advice to homeowners is to not wait for the RBA to act and instead consider switching to a better home loan offer. By comparing home loans now, it's possible to create your own "rate cut" and potentially save money on your monthly repayments. And for those who want to stay on top of the latest news and updates, you can follow us on WhatsApp for all the latest breaking news, celebrity updates, and sports news without any comments, algorithms, or concerns about your privacy.
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