‘Avalanche of rate hikes’ will cost borrowers more than $ 3,000 this year

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‘Avalanche of rate hikes’ will cost borrowers more than $ 3,000 this year


Experts are now predicting not one but an “avalanche of rate hikes” from the Reserve Bank of Australia that would cost the average borrower more than $ 3,000 this year.

Many of the major banks have forecast an increase in official cash rate – which remains at a historically low level of 0.1 percent – since June of this year.

All lenders now believe 2022 will feature not one but more rate hikes, to bring Australia’s exchange rate to around 1.5% by the end of 2023.

Experts predict an “avalanche” of rate hikes this year. (PAA)

Graham Cooke, head of consumer research at Finder, said banks are well aware of the forecasts and are moving early to hedge their margins.

“That’s why banks have raised rates on more than 400 fixed-rate home loan products in the past week, some up to 75 basis points,” Cooke said. “This indicates that they may not anticipate one, but an avalanche of rate hikes over the course of the year. The question is when, and that could be decided by international events.”

Finder analysis shows that a 75 basis point increase would cost the average borrower $ 3,175 this year while increasing repayments by $ 265 per month.

“Cash rate increases are like buses – they may take a while to arrive, then arrive one after the other,” Cooke said.

“The banks have already passed the RBA and it looks like the opportunity to lock in a long and low rate for your home may have passed.”

The average Australian borrower is looking to pay over $ 3,000 in extra mortgage repayments this year. (Sam Mooy)

Despite the gloomy outlook, Cooke said it has always been advised that borrowers take into account what other rates are available in the market.

Your home loan is probably your biggest expense, so you need to be proactive to always get the best possible deal.

“The difference between three percent and two percent doesn’t sound like much, but it adds up to thousands of dollars a year by refinancing your mortgage,” he advised.

“Even if you need to break your fixed contract, you’ll likely save more than the cost of the break fee. Plus, many lenders offer cashback up to $ 3,000 for refinancing, which is more reason to look into it.”

Major Australian lenders have already raised rates in anticipation of the RBA’s moves. (Attila Csazar)

Shane Oliver, chief economist at AMP Capital, said the triggers for the RBA’s interest rate hike were already in place.

“The RBA’s full employment goal has been met, wage growth is picking up and inflation is pushing well above the target with a growing risk that inflation expectations will start to rise, in which case they will become self-sustaining and the Budget will increase more stimulus this year, “said Oliver.

“So the conditions for a rate hike will be in place by June.”

America’s most expensive property on the market for $ 215 million

Median real estate values ​​of Australia *


Change in 2022:

Median value:


+ 0.3 percent

$ 1,116,889


+ 0.1 percent

$ 805,232


+ 6.4 percent

$ 749,293


+ 5.7 percent

$ 602,717


+ 1.9 percent

$ 542,338


+ 2.7 percent

$ 731,849


+ 1.7 percent

$ 494,635


+ 3.1 percent

$ 932.704


+ 2.4 percent

$ 738,975

* CoreLogic Hedonic Home Value Index. Results as of March 31, 2022

The information provided on this website is of a general nature only and does not constitute personal financial advice. The information was prepared without taking into account your personal goals, financial situation or needs. Before taking action on any information on this website, you should consider the adequacy of the information with respect to your goals, financial situation and needs.

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