Banks are responding to the Reserve Bank Australia (RBA) rate increases, with customers feeling the effects of rising monthly repayments.
Today, the RBA has announced another increase in the Cash Rate of 0.50%, taking the rate to 2.35%.
Last month, the Reserve Bank announced it would be lifting the cash rate by another 0.50%, bringing the figure to 1.85%. Following that announcement, ANZ, CBA and NAB were all very quick to confirm that their variable rates would lift by 0.50% from 12 August 2022, with other lenders following their lead soon after.
Under these changes, CBA’s owner-occupier principal and interest standard variable rate home loans will increase to 5.80% per annum, with ANZ’s variable index rate of an owner-occupier principal and interest loan lifting to 5.64% per annum. Similarly, NAB’s base variable rate for owner-occupier with principal and interest repayments is now 4.70% per annum.
The rates above will increase further if the banks pass on the latest interest rate increase announced today.
While there are many reasons for the rates increasing, the important thing to understand is how it will affect you. With rates rising and any further increases likely to be passed directly on to you (the consumer), this can have a big impact on your monthly outgoing payments.
So what does this mean for you?
The more the Reserve Bank increases the cash rate to manage inflation, the more the banks will pass on to you through interest rate rises. This may have a direct impact on your loan repayments and your bank balance each month.
See the below example of what impact a rate rise has to a home loan repayment in the current market.
Example
Earlier this year, a variable rate home loan has a balance owing of $800,000, with an interest rate of 3.25%. Monthly repayments were $3,481.
A 1% increase takes the interest rate to 4.25%, monthly repayments go up to $3,935.
A second increase of 1%, takes the interest rate to 5.35%, monthly repayments are $4,417 – that’s an additional $935.
A further increase of 1%, takes the interest rate to 6.25%, monthly repayments are now $4,925. Over three rate increases, this is an extra $1,444 per month required directly from your pocket. |
We understand that increasing loan repayments can cause concern and our Debt Advisory team are available to help with re-structuring and finance solutions.
Contact your Moore Advisor should you wish to discuss options in the face of rising interest rates.