Australian home borrowers are now paying the highest interest rates in 30 YEARS with the RBA’s 0.5% rise forcing them to fork out hundreds more on their mortgages every month
- Reserve Bank of Australia has raised interest rates by 0.5 percentage points
- This has taken the official RBA cash rate to a three-year high of 1.35 per cent
- May, June and July have added 1.25 percentage points to rates in a short time
- This has marked the steepest increase in three straight months since late 1994
Australian home borrowers have now copped the harshest rate increases in almost three decades with the Reserve Bank raising the cash rate by another half a percentage point.
The latest 0.5 percentage point rise on Tuesday takes the cash rate a three-year high of 1.35 per cent from 0.85 per cent.
This rise, on top of the May and June increases, means home have now copped 1.25 percentage points worth of rate increases over three consecutive months – the steepest increase in such a short time since late 1994.
The Reserve Bank of Australia has now also raised the cash rate at three consecutive monthly board meetings for the first time since 2010.
Australian home borrowers have now copped the harshest rate increases in almost three decades with the Reserve Bank raising the cash rate by half a percentage point
Rate rise pain in 2022
MAY: The 0.25 percentage point rise was the first increase since November 2010, ending era of record-low 0.1 per cent cash rate
JUNE: The 0.5 percentage point rise was the biggest monthly increase since February 2000
JULY: The 0.5 percentage point increase means borrowers have copped 1.25 percentage points of pain in three straight months – most since October to December 1994
With inflation running at 5.1 per cent – the fastest pace in two decades – RBA governor Philip Lowe has signalled more pain for home borrowers with unemployment at a 48-year low of 3.9 per cent.
‘Inflation in Australia is also high, but not as high as it is in many other countries,’ he said on Tuesday.
‘Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role.
‘Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices.
‘The floods are also affecting some prices.’
Dr Lowe last month forecast Australia’s inflation rate hitting seven per cent for the first time since 1990 as Russia’s Ukraine invasion keeps global crude oil prices elevated.
He signalled on Tuesday that would rate rises would most likely be needed to curb consumer spending.
‘One source of ongoing uncertainty about the economic outlook is the behaviour of household spending,’ he said.
The Reserve Bank of Australia has now also raised the cash rate at three consecutive monthly board meetings for the first time since 2010. Governor Philip Lowe last month forecast Australia’s inflation rate hitting seven per cent for the first time since 1990 as Russia’s Ukraine invasion keeps global crude oil prices elevated
Average capital city unleaded petrol prices are now well above $2 a litre, despite a temporary, six-month halving of fuel excise to 22.1 cents a litre in the previous Coalition government’s March budget.
The Commonwealth Bank is expecting the RBA cash rate to hit 2.1 per cent by November while NAB sees that rate being reached in December.
Westpac is predicting a 2.35 per cent cash rate by February 2023 while ANZ is forecasting a 2.25 per cent rate by May next year.
The latest 0.5 percentage point means a borrower with an average $600,000 mortgage will see their monthly repayments surge by $163, rising from $2,495 to $2,658 as their variable rate rose in line with the RBA move.
The Commonwealth Bank, Australia’s biggest home lender, last week trimmed its popular variable rate by 0.15 percentage points to 2.89 per cent but the RBA’s latest increase would most likely see that rise to 3.39 per cent.
The latest rate increases will further squeeze household budgets with a 141 per cent increase in wholesale electricity prices, in the year to March, set to be reflected in retail power bills, making up a third of what consumers pay.
What a 0.5 percentage point rate rise in July means for borrowers
$500,000: Up $136 from $2,079 to $2,215
$600,000: Up $163 from $2,495 to $2,658
$700,000: Up $191 from $2,910 to $3,101
$800,000: Up $218 from $3,326 to $3,544
$900,000: Up $245 from $3,742 to $3,987
$1,000,000: Up $273 from $4,157 to $4,430
Monthly repayments based on popular Commonwealth Bank variable rate rising from 2.89 per cent to 3.39 per cent should the Reserve Bank cash rate in July rise from 0.85 per cent to 1.35 per cent