Australians Paying Extra $5.52 Billion in Mortgage Repayments Monthly
Since the Reserve Bank of Australia began increasing interest rates two and a half years ago, Australians with mortgages have collectively paid an estimated extra $5.52 billion in repayments every month. Let’s delve into the details and understand the impact of these changes on everyday households.
Rising Mortgage Payments
- In March 2022, when the cash rate was at a record low of 0.1%, total mortgage payments were $9.01 billion.
- By June 2024, with the cash rate at a 13-year high of 4.35%, this figure has surged to $14.53 billion.
- Canstar estimates that 66% of this increase is attributable to interest charges.
RBA’s Monetary Policy
- The Reserve Bank of Australia is expected to keep the cash rate on hold post the September board meeting.
- This decision would mark a year of no change in interest rates after they were raised to 4.35% in November last year.
- The next rate announcement is scheduled for November 5 on Melbourne Cup day.
Impact on Borrowers
- With the average interest rate at 6.36%, a 0.25% rate cut would reduce repayments on a $600,000 mortgage by $92 per month.
- Five rate cuts totaling 1.25% could slash payments by $441 monthly on a $600k loan.
Lender Response
- Despite the high cash rate, 48 lenders have cut variable rates by an average of 0.21%.
- Additionally, 61 lenders have reduced fixed rates by 0.44%.
Future Rate Predictions
- Three out of the big four banks foresee rates remaining at 4.35% until February 2025, with CBA being the outlier.
- Westpac and ANZ anticipate a rate cut in February, with varying predictions on the number of cuts.
- NAB is more conservative, forecasting high rates until May, followed by multiple rate cuts.
RBA’s Approach
- Governor Michele Bullock indicated that the RBA is focused on bringing inflation back within the target range of 2-3%.
- The board opted to hold rates steady in the recent meeting to mitigate the risks associated with raising them.
In conclusion, the changing interest rate environment directly impacts mortgage holders in Australia. Understanding these trends and predictions can help individuals make informed financial decisions to navigate through these uncertain times. It’s crucial for borrowers to stay informed about the market dynamics and be prepared for potential adjustments in their mortgage repayments.