Average Australian borrowers will see their monthly mortgage repayment…




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Australians with a $600,000 mortgage are set to see their monthly repayments skyrocket $500 by Christmas – with the biggest rate increase since 1994 expected.

The highest inflation in 21 years on Tuesday saw the save Bank of Australia raise interest rates for the first time since November 2010.

Economists at Australia’s second biggest bank are now expecting the RBA to raise the cash rate seven more times in the coming year, with five of those increases expected by the end of 2022. 

While Tuesday’s 0.25 percentage point increase in the cash rate was bigger than market expectations of a 0.15 percentage point rise, home borrowers are expected to suffer already more harsh pain in June.

Westpac chief economist Bill Evans is forecasting a much larger 0.4 percentage point increase next month, which would be the biggest monthly increase in the RBA cash rate since December 1994.

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Australians with a typical $600,000 home loan are set to see their monthly mortgage repayments skyrocket by more than $500 before Christmas (pictured is a woman at a Melbourne auction)

Westpac forecasts more pain to come

JUNE: Up 0.4 percentage points

JULY: Up 0.25 percentage points

AUGUST: Up 0.25 percentage points

OCTOBER: Up 0.25 percentage points

NOVEMBER: Up 0.25 percentage points 

FEBRUARY: Up 0.25 percentage points

MAY: Up 0.25 percentage points 

A high wage price index for the March quarter, due out on May 18, could cause an already bigger-than-usual rate rise, amid fears the steepest increase in pay levels since 2009 could make inflation worse. 

‘A larger increase in the cash rate than 25 basis points is likely to be seen by the Board as necessary to convince agents that it is serious about the challenge and to accelerate the unwinding of the emergency measures that saw 65 basis points of rate cuts in 2020,’ Mr Evans said.

After the Covid pandemic sparked national lockdowns in March 2020, the RBA slashed the cash rate three times from 0.75 per cent, taking it to a record-low of 0.1 per cent by November that year. 

But in the year to March, inflation soared by 5.1 per cent – the fastest annual speed since June 2001 a year after the 10 per cent GST was introduced. 

Russia’s Ukraine invasion caused petrol prices to surge by 11 per cent, the most emotional annual increase since 1990 when Iraq invaded Kuwait. 

Mr Evans is now expecting the save Bank to raise interest rates in June, July, August, October and November, taking the cash rate from 0.35 per cent, following the May rise, to 1.75 per cent.

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The highest inflation in 21 years on Tuesday saw the save Bank of Australia raise interest rates for the first time since November 2010. Economists are now expecting the RBA to raise the cash rate seven more times in the coming year, with five of those increases expected by the end of 2022 (pictured is a woman choosing yoghurt at Woolworths in Sydney in 2011 shortly after the last RBA rate rise)

A borrower with a typical $600,000 mortgage would now be paying a 2.29 per cent variable rate until next week, when their new variable bank rate rise kicks in.

Based on the cash rate increasing from 0.1 per cent to 1.75 per cent by year’s end – a level unseen since August 2016 – their mortgage rate would rise to 3.94 per cent.

This would see their monthly repayments climb by $538 from $2,306 now to $2,844. 

This would affect someone with a 20 per cent place who has just bought a median-priced home that was worth $748,635 in April, going by CoreLogic data.

The average new Australian mortgage stood at $595,873 in February while the buyer of a mid-price home last month would have borrowed $598,908.

But in Sydney and Melbourne, where houses typically have values in the seven figures, a associate borrowing a $1million by November could see their monthly mortgage repayments climb by $897 from $3,843 to $4,740.

The Big Four edges have all passed on the official interest rate rise in complete to their home loan customers with National Australia Bank the last to act. 

NAB borrowers will see their variable mortgage rate rise on May 13, following a Wednesday morning announcement it would raise lending rates by 0.25 percentage points.

Commonwealth, Westpac, and ANZ on Tuesday night announced their variable home loan rates would increase by 0.25 percentage points, in line with the RBA’s quarter of a percentage point move.

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Westpac chief economist Bill Evans is forecasting a much larger 0.4 percentage point rte increase next month, which would be the biggest monthly increase in the RBA cash rate since December 1994 (pictured is a Brisbane auction)

How the edges have responded to RBA rise

Commonwealth Bank: 0.25 percentage point increase from May 20, exactly matching the official interest rate rise.

ANZ Bank: 0.25 percentage point increase from May 13, in line with the official rate rise

Westpac/St George: 0.25 percentage point increase from May 17, the same as the RBA’s increase.

National Australia Bank: 0.25 percentage point increase from May 13, following cash rate rise 

That method the lowest variable rates with CBA, NAB and ANZ are rising from 2.19 per cent to 2.44 per cent, while Westpac’s increases from 2.09 per cent to 2.34 per cent.

But more customers would before have been paying the slightly higher 2.29 per cent variable rate, with less strict conditions on credit card use, with those rates at three of the Big Four edges rising to 2.54 per cent. 

CBA customers will cop an increase to home loan repayments from May 20, while ANZ’s rate rise is effective a week earlier, from May 13 and Westpac’s begins on May 17.

Westpac, ANZ and NAB are expecting the cash rate to hit two per cent by 2023.

This would see the RBA raise interest rates seven times, something which hasn’t been done since 2009 and 2010 after the Global Financial Crisis.

But save Bank Governor Philip Lowe on Tuesday hinted the cash rate could hit 2.5 per cent by late 2023.  

Mr Evans said the RBA would raise rates again in February and May, which would take the cash rate to 2.25 per cent.

‘That will be a level where the household balance sheet will come under some strain and the later movements by the Board will be much more careful,’ he said.

How much MORE you could be paying by Christmas

$500,000: Monthly repayments rising by $448 from $1,922 to $2,370

$600,000: Monthly repayments rising by $538 from $2,306 to $2,844

$700,000: Monthly repayments rising by $627 from $2,691 to $3,318

$800,000: Monthly repayments rising by $717 from $3,075 to $3,792

$900,000: Monthly repayments rising by $807 from $3,459 to $4,266

$1,000,000: Monthly repayments rising by $897 from $3,843 to $4,740

Data based on variable rate rising from 2.29 per cent to 3.94 per cent before the save Bank of Australia raised the cash rate

 

Source: Daily Mail

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