“More needs to be done”: RBA hikes cash rate again, but when will it end?

Posted: 6 June 2023 2:30 pm
News
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The cash rate now sits at 4.10% after the Reserve Bank announced another rate rise.

The national cash rate has risen above 4% for the first time in more than a decade.

The Reserve Bank of Australia (RBA) increased the cash rate today (June 6) as it continues to fight high inflation.

With an increase of 25 basis points, the cash rate now sits at 4.10%. That's a 4% rise since the RBA began its rate attack in May last year.

If you've been a homeowner over that time, you're likely forking out much more than you were before. So this latest hike is more unwelcome news.

How much more will you be paying?

The average home loan size in Australia is currently $585,101. The lowest interest rate available in April 2022, before the rate rises, was 1.7% (seems incredible now, I know).

Assuming that loan amount with that interest rate on a 30 year loan paying principal and interest, you would have been paying $2,076 per month.

Adding on the 4% increase we've seen since April last year, you'd now have an interest rate of 5.70%. This would increase your repayments to $3,396 per month - that's an extra $1,320.

Just from this rate rise you're looking at an average of $92 more than you're paying now.

What do the experts say will happen next?

Our panellists are currently predicting an average interest rate peak of 4.17%. The majority (67%) also believe that this peak will be before September, so we are expecting at least one more rate hike in the next couple of months - but of course, that's all subject to change.

"The RBA is in the unenvious position of steering the economy away from its inflationary curse, and more needs to be done. Consecutive rate rises are needed, rather than its regrettable stop start course it had earlier this year," said The Daily Telegraph's Jonathan Chancellor when predicting this month's increase.

Thankfully, there is better news for the long term!

Finder's head of consumer research, Graham Cooke, said "the flood waters should start to subside". Inflation is expected to slow and 85% of the economists believe Australia will be back at the 2% target in the June quarter next year.

"Inflation has bumped up a tad in April, but is still well below its December peak. The long-term forecast from our panel is for inflation to continue to decline, which should mean the cash rate does too," Cooke said.

Mortgage holders are still struggling though: so what should you do?

If you're worried about your mortgage repayments, particularly after today's rate increase, here's what you can do:

  1. Wait and see what your lender does. Banks won't make a decision on their rate changes straight away, so hold tight. They should send you notification of any rate changes with plenty of notice before the change comes into effect.
  2. Take a look at your budget. Depending on the level of how much you are struggling, this may not help. But it's a good place to start. Take a look at what you've got coming in and then write down everything you have going out. You might need to be really strict on where you cut back.
  3. Speak to your lender. People often assume that banks won't care, but that's not actually true. Many banks are supporting their borrowers with hardship assistance, which could be through repayment pauses, lower interest rates or temporarily moving you onto an interest-only plan.
  4. Consider refinancing. The market is making it harder for a lot of borrowers to refinance, but it's worth looking into. You might be able to refinance your interest rate with your current lender, or another lender may be able to offer you a better deal.

If you're worried about being in mortgage stress, Finder recently built a calculator so you can see exactly where you stand.

Mortgage stress calculator
Enter your current mortgage details
What is your household income annually (pre-tax)?
$
How much is left on your loan?
$
Years left to pay off?
years
Your interest rate p.a.?
%
Repayment type
Postcode
Your age
Mortgage stress results
0%
20%
25%
30%
50%
100%
In control
Monitor your finances
At risk
In mortgage stress
Hardship
Your max interest rate before stress =
5 Steps to mortgage empowerment:
Step 1 - Refinance to a cheaper home loan
Step 2 - Get expert tips to save money on bills and reduce your everyday expenses.
Step 3 - Get your budget in tip top shape and consolidate debts.
Step 4 - Ask your bank about its hardship policies or use a broker to find a debt solution.
Step 5 - Call the National Debt Helpline - 1800 007 007.
The mortgage stress calculator is not a complete assessment of your financial position. It is a general guide only. There are many additional factors unique to each individual mortgage that borrowers should take into account. Results are only as accurate as the information entered by the user. We recommend speaking to your financial adviser, mortgage broker or lender when considering your financial position and mortgage decisions.
You're in mortgage stress, but you don't have to figure your way out of this alone. If you're struggling to make ends meet due to mortgage stress, there are steps you can take to get into a better position. We have some guides for you below to help you compare your current costs to reduce your expenses, and also work with your bank to manage your situation. If you're struggling to stay on top of your financial commitments, you could reach out to a mortgage broker for personal advice (they're free!).
You're not in mortgage stress – yet – but you're at risk of falling behind if you're not careful. Definitely start budgeting and look for ways to pay less on your household bills by comparing your everyday expenses to find cheaper deals. Comparing your home loan is a good place to start, and we have other guides that can help you below.
You're doing okay; there's no need to panic. But it's a good time to start thinking about your budget and making sure you're not caught off guard by a sudden unexpected expense. Get back in the green and start paying less for your loan by refinancing to a cheaper rate.
Congratulations! You're doing well. Make sure you check back as your situation changes. Remember, it's always a good time to compare your rate with other loans on the market so you're never paying more than you need to, and it never hurts to pay less for everyday bills. Get the Finder app to start saving today.
Like many Australians, you're doing it tough. You do have tools available to you to turn it around, as some banks have hardship policies that can pause or lower your repayments. If that doesn't help, you may need to consider selling or moving, but before you make any drastic decisions, contact the National Debt Helpline for support.

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