Forecasts are that the cash rate could hit 2.5 per cent by mid to late 2023.
If this happens, a borrower with a $500,000 loan balance could see their monthly repayments rise by $652 a month in this time.
In announcing the decision, Reserve Bank governor Philip Lowe said the rise was in response to the fact that “inflation in Australia has increased significantly”. “Today’s increase in interest rates will assist with the return of inflation to target over time.” Dr Lowe said the Reserve Bank would likely keep raising rates over the months ahead.
Check out #5 tips to manage your mortgage:
- Make fortnightly repayments instead of monthly
It’s all down to a timing trick. There are only 12 months in the year, but 26 fortnights.
- Use an offset account
If you have a variable home loan, an offset account can be a useful tool.
You can still use it as a regular transaction account but, just by having the money sitting there, it reduces how much interest you’re paying on your loan.
- Renegotiate your rate
Make sure you’re on the best deal with the lowest rate. The current rates on the market vary widely. Don’t forget to look beyond the headline rate and also check the fees.
- Commit to extra repayments
Deciding in advance to make extra payments on your loan is a great strategy.
- Pay principal and interest
Try and make sure you’re making principal and interest repayments. If you only pay off the interest, your actual loan remains the same.
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