Home borrowers will be paying an additional $442 a month on their mortgage if, as expected, The Reserve Bank of Australia pushed up the cash rate yet again in September – and adds another increase before the end of the year.
The September rise, expected on Tuesday, will be the fifth consecutive rate increase.
“There’s not many households across the country that wouldn’t be feeling the effect of the rate increases by now. If the cash rate increases another 25 basis points as expected, the total increase we’ve seen this year is 200 basis points,” says Claire Frawley, Mozo Personal Finance Expert.
Owner-occupiers paying principal and interest on a $400,000 loan, with the average variable interest rate of 4.55% would see a further $57 monthly increase, which is $684 per annum, if the RBA was to increase the cash rate by 25 basis points in September.
An owner occupier who started the year with the May average variable rate of 3.02% would now be paying $442 extra each month if their lender passed on all 200 basis point increases.
“With another rate rise expected this month, borrowers need to prepare their household budgets once again for an increase to their home loan repayments.”
Meanwhile a new divide is opening up, with the Commonwealth Bank cutting variable home loan rates on Friday – but existing borrowers have yet again missed out.
CBA lowered its basic home loan rate by 0.10 percentage points for owner-occupiers and up to 0.80 percentage points for investors. Its new lowest variable rate is now 3.69 per cent.
This is the second time CBA has discounted variable rates for new customers, said RateCity.
By not getting these additional rate cuts, RateCity.com.au estimates a current CBA customer has paid up to $5000 extra in interest over the last three years.
RateCity says: “Complacent variable rate customers have been whacked with 1.75 percentage points of rate hikes in the last four months.”
Here’s how comparison site MOZO sees the rises:
Sydney, Melbourne & Canberra Median House Value Loan Estimate
The median house values in Sydney, Melbourne and Canberra are over $800,000. For borrowers with a larger loan of $800,000 a rate increase of 25 basis points would add an additional $106 to their monthly mortgage repayments, taking repayments to $4,575.
Average Big Four Bank Variable Interest Rate
Customers who hold a mortgage with one of the big four banks could be facing a yearly increase of $708 if the RBA increases the cash rate by 25 basis points and the big banks continue to pass on the rate increase in full.
The latest analysis from Mozo has revealed that if lenders pass on another 25 basis point increase to the cash rate in full in September, the average variable home loan rate would hit 4.80%, with the average big bank variable rate topping 5.41%
Lowest Interest Rate in Mozo database
Mozo’s database shows the leading variable rate is 3.34% with P&N Bank, which is 182 basis points below the big four average variable rate (5.16%) and 121 below the average variable interest rate (4.55%). For mortgage holders on the leading rate, Mozo found a 25 basis point increase could add $648 to their yearly mortgage costs.
“Households that are feeling the pinch should really consider refinancing to a lower interest rate, even as rates are expected to continue to increase. All savings add up and could help alleviate the overall rising cost of living,” says Frawley.
Mozo compares more than 1,800 products from over 200 banking, insurance, energy and broadband providers to help thousands of Australians find a better deal each month via its award-winning comparison tools and calculators. As one of the most visited comparison sites in Australia, our team of experts routinely provides financial commentary and advice for major news outlets in Australia. Mozo is part of Future plc, an international media group and leading digital publisher.