The Reserve Bank of Australia’s (RBA) decision to implement a
sixth consecutive cash rate increase will add further burden to the pockets of
everyday Australians, according to RateCity.
central bank made the move to
bump the cash rate up by 25 basis points at its October board
meeting, taking it to 2.60 percent, which sees the rate surpass the decade
average prior to the onset of COVID of 2.55 percent.
Not since July 2013 has the cash rate been this high,
with RateCity deducing that should lenders opt to pass on the rate hike to
their customers, as is anticipated, the average owner-occupier with a $500,000
loan and 25 years remaining will see their payments increase by $74, taking the
total increase in monthly repayments since May to $687.
For any owner-occupier with a $750,000 loan and 25 years
remaining, monthly repayments are set to increase by $110 following the RBA’s
latest decision, with this sum rising to $147 for borrowers with a $1 million
RateCity estimates that the average existing
owner-occupier rate will be 5.36 percent, with a competitive variable rate
that will be just over 4 percent for owner-occupiers paying principal and
Sally Tindall, RateCity’s research director, outlined
how the RBA has "taken its foot off the accelerator by reverting back to a
standard 0.25 percentage point hike this month as it assesses global and
"Variable rates have now risen 2.5 percentage points
since May, which means the average owner-occupier will soon be paying a rate
that’s well over 5 percent,” Ms. Tindall said.
She explained that the rate hikes would not cease, given
governor Philip Lowe’s indication that there are more to come as he continues
to walk a "very fine line in trying to tame inflation while keeping the
"Borrowers need to remember there’s a lag on when the
RBA hikes official rates and when extra money comes out of their bank accounts.
People might think they’ve conquered five rate hikes already, but the reality
is, most variable borrowers have only felt the impact of the first three,” she
As for when customers can expect an announcement on
passing on the rate hike, that period has ballooned out with each decision,
culminating in NAB being the quickest of the big four to announce their
decision, three days after the announcement.
For such reasons, Ms. Tindall believes that "all eyes are
on the banks as to what they’ll announce and how they will make customers wait”.
"The banks have shown they’re entirely capable of making
their RBA rate announcement within 24 hours of a rate hike. There is no reason
for them to hold back from telling customers what impact this will have,” she
For homeowners with an interest rate beginning with
"5”, Ms. Tindall recommends speaking to your bank about brokering a better deal
or, given that the Australian Bureau of Statistics (ABS) latest data indicates
refinancing is at record levels, speak to another lender about switching
allegiance to them for a lower charge.
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Wednesday, 5 October 2022