The Reserve Bank is on fire! This time, it's raised the cash rate by 0.50% to 1.35%. So what's the story for your home loan?
The first Tuesday of each month is now filled with more dread than taking out the rubbish on a cold winter’s night.
The Reserve Bank of Australia (RBA) really is on fire, this time increasing the official cash rate by 0.50%, from 0.85% to 1.35%. That’s the third time in as many months.
Now, we ain’t really surprised… While last year the RBA said it wouldn’t raise the cash rate until 2024, it’s now really changed its tune.
In fact, the RBA has said it wants to get the cash rate up to 2.5%, in the hopes that it’ll steady the rising inflation rate.
This means if you’ve got a variable home loan, your budget is about to get a ‘lil tighter. That’s ‘cos generally when the RBA increases the official cash rate, banks and lenders will generally increase their home loan rates by the same percentage.
Take a look at this table, which shows the extra repayments on home loans each month depending on the loan size and the rate hike.
Source: Mozo. Based on owner occupier loans of $400,000, $615,310 and $800,000 over 25 years.
If you have a fixed loan, you won’t see any immediate changes.
Quick recap: the official cash rate is the amount of interest that banks pay when they borrow money (yep, banks - they’re just like us!).
The RBA decides what the official cash rate is on the first Tuesday of every month (except January). Once it makes its call, banks and lenders tend to change their interest rates on savings accounts and home loans (generally, in line with the official RBA cash rate).
We know that those with a variable home loan are up for a little extra cash each month, which means household budgets are about to get tighter.
If you don’t have a home loan, but you have other loans (i.e. personal or car loans), you may see interest rates on those loans rise too. AKA, ya budget’s about to get squeezed.
But there’s good news too: in theory, interest rates on savings accounts should increase, which means your savings might be earning you some more money. However, often they don’t… So don’t get ya hopes up.
You can read more about how the cash rate rise impacts you here.
All information contained in the Flux app is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice. While we do our best to provide accurate information on the podcast, we accept no responsibility for any inaccuracies that may be communicated.
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