The Reserve Bank of Australia (RBA) has increased the official cash rate by 50 basis points to 0.85%. How much extra should you expect to pay on your home loan?<\/p>\n
Today\u2019s cash rate hike is the second in as many months, with the RBA last month increasing the official cash rate from a record-low 0.10% to 0.35% amid high inflation concerns.<\/p>\n
Before then, we hadn\u2019t had a cash rate hike since November 2010.<\/p>\n
Now usually, the RBA increases or decreases the cash rate by 0.25%.<\/p>\n
However, today\u2019s larger than expected 0.50% cash rate hike is due to inflation in Australia having \u201cincreased significantly\u201d, said RBA Governor Philip Lowe in a statement.<\/p>\n
\u201cGiven the current inflation pressures in the economy, and the still very low level of interest rates, the Board decided to move by 50 basis points today,\u201d said Governor Lowe.<\/p>\n
\u201cHigher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.\u201d<\/p>\n
Unless you\u2019re on a fixed-rate mortgage, it\u2019s extremely likely the banks will follow the RBA\u2019s lead and increase the interest rate on your home loan very soon.<\/p>\n
How much your repayments will go up each month depends on a number of factors, including how your particular bank responds to the cash rate increase and the size of your mortgage.<\/p>\n
But let\u2019s say you\u2019re an owner-occupier with a 25-year loan of $500,000 (paying principal and interest).<\/p>\n
This month\u2019s 50 basis point increase to 0.85% means your monthly repayments could increase by about $133 a month.<\/p>\n
If you have a loan of $750,0000, repayments will likely increase by about $200 a month, and a $1 million loan is expected to cost an extra $265 a month.<\/p>\n
It\u2019s very likely that we\u2019ll see more RBA cash rate hikes before the year is out.<\/p>\n
In fact, the RBA has basically said as much.<\/p>\n