The Reserve Bank of Australia (RBA) raised the cash rate on Tuesday (3 May), increasing it from the historic low of 0.1 per cent, up by 25 bps to 0.35 per cent.
The increase was the first for the cash rate in nearly 12 years and the first movement since it was slashed from 0.25 per cent in November 2020.
What does this mean for your mortgage repayments on a variable loan?
If passed on in full by banks (which the big 4 have already announced), the rate rise will add approx. $70 a month to repayments on a $500,000 mortgage, and double that on a million-dollar loan.
What does this mean if you want to borrow?
Increasing interest rates does impact your ability to borrow, as the higher loan repayments are run through the bank calculator, the maximum loan amount will drop accordingly.
Those borrowers looking to maximise their borrowing capacity, such as first home buyers, are likely to feel it the most. However, as the rate increase is applied across all debts held, borrowers with multiple loans are also going to feel the impact more than others.
So what’s the answer?
The RBA’s decision means lenders will start to increase the pricing on their variable rate home loan products and as we’ve already seen happen with fixed rate loans over the past 6 months.
The market still remains extremely competitive and banks will be looking to attract customers through initiatives like cash-back offers, making now a great time for first time buyers and borrowers a like to shop around or refinance.
So contact us today to refinance or re-assess your borrowing capacity!
Our Senior Mortgage brokers are always available for a chat and you can contact Matthew or Trudi on 08 8211 9426.
