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With the first rate rise in over 10 years, from the record-low 0.10% to 0.35% by The Reserve Bank of Australia (RBA), mortgage repayments will rise amid already high inflation concerns – with more cash rate increases likely to follow.
This has left many feeling like this may be the best time to refinance. Our Synergy Business Finance team discusses the cash rate rises below and what they mean for your mortgage.
Ongoing rises expected
With inflation jumping to a 20-year high, many economists are predicting the RBA will continue to tighten monetary policy with further increases to the cash rate.
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%.
A recent report from the National Australia Bank said stronger than expected results in data, due to be released this week, could ignite further increases in the cash rate to 0.85% next month.
“Although not set in stone, further rate increases are expected. Meaning reviewing loan structures to ensure additional rate increases will not affect long term objectives is crucial – and what we’re advising our clients to do.” Synergy Business Finance Managing Director Angie Barnard said.
The roll-on affect for your mortgage
Some Chief Economists are tipping the RBA to raise the cash rate to 0.75%, which for the average borrower with a $750,000, 25-year-occupier loan could be expected to increase their monthly repayment by $159, or almost $2000 a year.
“In March 2022 the average loan size for an owner-occupied dwelling in Queensland was $516,615. A cash rate increase to 0.75% could see monthly mortgage repayments increase by $109 for a 25-year owner-occupied loan.” Synergy Business Finance Manager Brendan Philp said.
For those who took advantage of historically low 2-year fixed rate mortgages in 2020 or 2021, now is a good time to start planning for the transition of your home loan to the next rate.
“The market has changed considerably during this time and the experts at Synergy Business Finance are here to help you navigate the change” Brendan added.
Increases in monthly repayments will be dependent on a number of factors, including how each particular bank responds to the cash rate increase as well as the overall structure and size of the mortgage.
“Our access to a large range of lenders, which combined with long standing experience and expertise, aims to ensure a loan product that is tailored to our client’s needs.” Brendan said.
If you would like to explore options, which could include refinancing ahead of any other future cash rate hikes that the market has signalled, please contact our team at Synergy Business Finance today.
