When Will Mortgage Rates Go Down? Australia Projections
Another cash rate increase – the Reserve Bank of Australia has once again implemented a cash rate hike that has now brought it up to 4.35%. This is the thirteenth cash rate increase since April 2022.
But wait, experts warn that mortgage holders should prepare for one more rate rise this year especially if inflation continues. So may not be as Merry a Christmas as everyone had hoped
In an environment already burdened by this ongoing inflation, homeowners are facing yet tougher financial challenges with the predicted upticks in home loan interest rates. The escalating cost of living plus mortgage stress compounds the pressure on millions of Australians.
How Interest Rates Increase Translate in Mortgage Repayments
Homeowners are bracing for potential financial repercussions, with the potential extra $1,815 in monthly mortgage repayments since last year’s increases.
Thirty lenders, including the Big Four, have declared intentions to raise their respective variable home loan rates. These banks and lenders have specified dates for the implementation of increases, but the actual hike on your monthly mortgage will take two months after the announced increase.
Existing mortgage holders’ repayments generally take longer to adjust. The lender will send a notification letter with a notice period before the effectivity of interest rate increase. However, new customers will face higher interest charges from the specified effective dates.
How much more will the mortgage repayments cost?
Estimates could bring thousands more to monthly home loan fees. For example, a 30-year mortgage worth $500,000 could potentially have over $1,210 additional cost. So, from, say, $2,300 the monthly repayment would be $3,510.
And a $750,000 mortgage could rack up $1,815 more. If you’re paying $3,500 per month that would bring the total monthly repayments to a whopping $5,315.
Are Australians able to pay? Data on late repayments suggest that homeowners are still able to carry the bigger home loan costs despite continuous increases. It’s a slow build, as the late repayments have started to rise at 1.3% as of June of this year.
Late repayment rates are still below what was reported during the pandemic at 1.9%, but the late repayments have started to rise, albeit slowly. Experts suggest that late repayments may not be the best measure of mortgage stress either, as homeowners tend to prioritize housing payments even if it really is taking a huge chunk out of monthly income. It remains to be seen whether more borrowers would succumb to the rising rates and overall inflation.
Cash Rate and Inflation
It’s a challenging time for homeowners, but it seems that at least one more cash rate increase would happen after the year ends. The RBA has repeatedly advised that repeated hikes are needed to control inflation, and hinges on the country’s economic performance despite being in a per-capita recession.
The government has not ruled out further rate hikes, and predictions presume that the cash rate will be at 4.60% by February 2024. That looming event will impact over 500,000 homeowners who are approaching the mortgage cliff.
While data suggests that arrears are still in check, with potential rate hikes looming and inflation ongoing, it’s going to be a tough way for Aussies through next year.
Let us know if we can assist you in home loan refinancing, application, and renegotiations. Our mortgage brokers are available through online or in-person consultation. Talk to us today.
