It’s another grim day for borrowers around Australia, with the RBA raising the cash rate for the 12th time since May last year.
At this month’s Board meeting, RBA governor Philip Lowe confirmed the 25 basis point hike.
It’s been 399 days since the Board started its record run of rate rises, with a $500,000 variable mortgage holder now set to pay $1,209 more each month than at the start of May 2022 following the 400 basis point increase.
It comes as Compare the Market’s latest survey revealed more than half of borrowers are considering refinancing via an online-only platform.
The data also found a quarter of homeowners would rather refinance in person, while 6% indicated they wouldn’t refinance at all.
Compare the Market’s General Manager of Money, Stephen Zeller said the majority of borrowers are looking to refinance to a lower rate.
“The research is quite startling, that people may be prepared to sit out of the refinance war, and potentially risk much higher monthly repayments,” Mr Zeller said.
“A person with a $600,000 mortgage could be paying $1,451 more each month than at the start of May 2022, so it really does pay to do your research and be prepared for that fixed rate cliff.
“The Board’s decision to raise the cash rate for the 12th time in just over a year shows there’s still a need to tame the inflation beast,” Mr Zeller said.
“Unfortunately, we’re not nearly close enough to the RBA’s target range of 2-3%.
“But borrowers need to act fast if they want to refinance to a lower rate attached to a cashback offer.
“Some of the big banks have already announced they will be soon ceasing their cashback offers, and with the fixed rate cliff edging ever closer, other lenders have been tipped to follow suit.
“Thousands of Australians may miss out on cashback offers if they don’t act soon, with some lenders still offering up to $4,000 for your business.
“The difference between some of the advertised rates we analysed was 60 basis points.
“Therefore, a person with an owner-occupier $600,000 loan could be saving $228 per month if they were to switch from a rate of 5.99% to 5.39% − and get a cashback offer of $4,000”.
For Australians on a variable rate home loan, here’s how a 25 basis point increase in the cash rate, if passed on by the lender in full, would affect monthly repayments:
| Mortgage size | The difference between variable rates in the market | ||
| Minimum monthly repayments on variable P&I rate of 5.39% | Minimum monthly repayments on variable P&I rate of 5.99% | Difference in monthly minimum repayments | |
| $500,000 | $2,805 | $2,995 | +$190 |
| $600,000 | $3,365 | $3,593 | +$228 |
| $750,000 | $4,207 | $4,492 | +$285 |
| $900,000 | $5,048 | $5,390 | +$342 |
| $1,000,000 | $5,609 | $5,989 | +$380 |
| Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 5.99% compared to 5.39% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees. | |||
For Australians on a variable rate home loan, here’s how a 25 basis point increase in the cash rate, if passed on by the lender in full, would affect monthly repayments:
| Mortgage size | 25 basis point increase to 6.25% p.a. | |
| Increase in monthly minimum repayments | Increase over the life of the loan | |
| $500,000 | +$81 | +$29,100 |
| $600,000 | +$97 | +$34,920 |
| $750,000 | +$121 | +$43,650 |
| $900,000 | +$146 | +$52,380 |
| $1,000,000 | +$162 | +$58,200 |
| Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6% p.a; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees. | ||
Australians with a $500,000 variable mortgage may soon be paying $1,209 more each month than they were at the start of May 2022, following a 400 basis point jump in just 12 months.
| Mortgage size | Increase in average monthly repayments since the start of May 2022 (400 basis points) |
| $500,000 | + $1,209 |
| $600,000 | + $1,451 |
| $750,000 | + $1,814 |
| $900,000 | + $2,177 |
| $1,000,000 | + $2,418 |
| Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 2.86% p.a in May 2022; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees. | |
Australians with a $500,000 variable mortgage may soon be paying $1,209 more each month than they were at the start of May 2022, following a 400 basis point jump in just 12 months.
Mr Zeller said there’s plenty of motive for borrowers to refinance.
“Australians just don’t have the spare cash that they used to.
“Many households have eaten into the buffers and savings they developed through the Covid-19 pandemic.
“After 12 rate rises, people don’t have as much wriggle room to be able to be complacent and be stuck on an uncompetitive rate.
“Similarly, if you’re on a fixed rate due to expire, it might be time to consider looking for the most competitive rate available and planning to make the switch or negotiating a lower rate with your current lender at least a month beforehand”.
*Survey of 1,010 Australians, conducted in April 2023.
For more information, please contact:
Natasha Innes | 0416 705 514 | [email protected]
Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.
