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RBA interest rate hike could cost Aussies an extra $1,529 a month

A composite image of Australian money piled on top a flat surface and RBA governor Philip Lowe with an arrow pointing upwards in the middle.
The RBA is expected to deliver another double-whammy rate hike next week. (Source: Getty)

The Reserve Bank of Australia (RBA) is expected to hike the interest rate for the sixth consecutive month on Tuesday, with mortgage holders bracing for higher costs.

The RBA will be deciding between a 0.25 and a 0.50 percentage point hike, with the latter now the more likely option according to experts.

This month’s Finder RBA Cash Rate Survey found 97 per cent of the 39 economists surveyed believed the RBA will lift the cash rate 0.5 per cent to 2.85 per cent.

This could be the highest level since April 2013 and the fifth double hike in as many months.

If this happens, the average variable borrower could see their monthly repayments rise by another $148.

However, the RBA has hiked the rate five times already.

How much would a 0.50 per cent hike cost?

For an owner-occupier borrower with a $500,000 debt at the start of the hikes, and 25 years remaining on their loan, the total increase to their monthly repayments could be $760 – a 33 per cent increase since the start of May.

For someone with $750,000 remaining on the loan the total increase in monthly repayments since May would be $1,140.

For $1 million remaining, monthly repayments would have increased $1,520 since May.

How much would a 0.25 per cent hike cost?

If the RBA increases the cash rate by just 0.25 per cent, their repayments would rise by approximately $74 a month, with a total increase from the start of May to October of $687.

For an owner-occupier with a $500,000 debt at the start of the hikes, and 25 years remaining on their loan, the total increase to their monthly repayments could be $687 since May.

For someone with $750,000 remaining on their loan, their monthly repayments would have risen by $1,030 since May.

And for someone with $1 million left on their loan, the monthly repayment would have risen $1,374 since May.

More rate hikes to come after October

RateCity.com.au research director, Sally Tindall, said the RBA will be weighing up a 0.25 and a 0.50 percentage point rate increase on Tuesday, but the double hike is the most likely outcome.

“If this happens, the cash rate will hit the highest level in nine and a half years,” Tindall said.

“As a result, the average owner-occupier could see their repayments increase by a third, with more hikes still to come.”

Tindall noted that RBA governor Philip Lowe has indicated the bank expects to dial back the size of its hikes, but experts don't believe October will be the month that starts.

“Borrowers should keep track of their repayments and prepare for more hikes to come,’ Tindall said.

“For many families, the August and September rate hikes are still yet to hit their bank accounts, with more likely to be in the pipeline.”

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