Record rate increases and your mortgage

This marks the greatest increase in interest rates in over 22 years and has left many Australians concerned about the ongoing rate increases and what they mean to their already tight cost of living expenses. Our Synergy Business Finance team discusses the cash rate rises below and what they mean for your mortgage.

Cost of living concerns

As tipped, many economists have predicted that the RBA will continue to tighten monetary policy in an attempt to reduce inflation rates which are currently sitting at a 20-year high.

Inflation figures for the March quarter showed CPI inflation rise to a surprising 5.1% over the year, and 2.1% over the quarter. While the RBA’s preferred measure of trimmed mean inflation lifted well above the target band to 3.7%.

“Additional rate increases are a concern for many who may already be feeling cost-of-living stress. However, the hike in interest is intended to do the opposite, with rate rises assisting with the return of inflation to target over time – this may not be for over a year yet.” Synergy Business Finance Managing Director Angie Barnard said.

“With electricity, petrol, food and other cost of living expenses still rising, it’s important that Australians can ensure the best possible interest rates to relieve pressure month to month.” Angie added.

What will your mortgage look like

The new cash rate set in June at 0.85% marked the first back-to-back cash rate hike in over 12 years. Rising by over 50 basis points from May’s increase.

“In April 2022 the average loan size for an owner-occupied dwelling in Queensland was $527,452. An interest rate rise of 0.50% on the average outstanding home loan rate of 2.86% could see monthly mortgage repayments increase on a loan of that size by $138 per month or $1656 a year for a 25-year owner-occupied loan.” Synergy Business Finance Manager Brendan Philp said.

With funding costs increasing for banks, we are seeing all the major lenders passing on the cash rate increase to their customers.

“Despite the latest increase to the cash rate and interest rates there is still a lot of competition in the lending market and in an ideal world, your interest rate should start with a 2” Angie said.

“Accessing a large range of lenders is essential to ensure that the rate and structure of a loan is best for your circumstances. Which is why an experienced broker with expertise in this area is best.” Brendan added.

With the cost of living and the cash rate expected to continue to rise into 2023, now is a great opportunity to review your home loan.

If you would like to explore options like refinancing your home loan, please contact our team at Synergy Business Finance today.