Insights 7th March 2023
What does the rate hike mean for you?
The tenth straight interest rate hike was announced by the Reserve Bank of Australia today, this time in the form of a 0.25% rise, taking the nation’s cash rate to a decade-high rate of 3.6%, which is in-line with consensus expectations. 10 rate rises over the last 10 months is a record for consecutive increases in Australia.
The recent slew of economic data shows the economy is cooling down under, with economic growth advancing just 0.5% in the December quarter which fell short of the 0.8% growth forecasts. Wages growth, another key indicator, rose 0.8% in the December quarter, or 3.3% over the year. The wages growth rate was slower than economists had expected, and provided the RBA with another sign that interest rate hikes to date are playing a part in cooling growth and demand which should help to reduce inflation.
As of today, the country’s cash rate is at 3.6%, but what does this mean for you?
On the home loan front, if lenders pass the full rate hike onto customers, then a 25-year home loan of $500,000 at the current rate of say 5.88%, home owners need to pay an additional $76 per month. This takes the monthly repayment from $3185 to $3261 at the new rate of 6.13% per month.
Home owners have seen their monthly repayments increase about $1,000 per month, which equates to around $12,500 over the year across all rate hikes so far for every $500,000 borrowed.
The cost-of-living pressures are extremely high for some Aussies, but it is hoped after today’s rate hike, that the RBA can begin to ease the increases over months to come, amid signs of cooling economic growth.