Paying off a mortgage? Here’s how the RBA interest rate rise will affect your repayments

theguardian.com:

The Reserve Bank of Australia has acted to lift interest rates from emergency lows at its 3 May meeting to curb soaring inflation hitting households.

It’s the first time in more than a decade that the cash rate target has been increased, reinforcing expectations property prices will fall, particularly in Sydney and Melbourne.

Here’s what the move means for homeowners with mortgages.

Monthly mortgage repayment increases will be relatively modest under the new rate rise of 0.35%. But the RBA governor, Philip Lowe, has warned borrowers should brace themselves for further hikes to bring inflation back into the target band.

Under the new rate, the monthly payment on a $600,000 home loan would rise to $2,324, an increase of $74, Finder said.

For someone with a $1m loan, repayments would rise by $130 a month.

But if the cash rate rises to 2% by May next year, as predicted by Westpac, RateCity said repayments for the average borrower with a $500,000 debt would rise by about $511.

CoreLogic research director, Tim Lawless, said under a 100 basis point lift in variable mortgage rates, a new borrower in Sydney would be facing a rise in monthly mortgage costs of $486. Under a 200 basis point rise, mortgage costs would be $1,005 higher than current levels.

Nationally, a 100 basis point lift would lead to a $323 rise in monthly mortgage costs, jumping to $668 under a 200 basis point lift.

“Past research from the RBA has pointed to ‘high end’ housing markets with higher investor concentrations being more sensitive to changes in interest rates in the short term,” Lawless said.

“This may be why Sydney and Melbourne markets are already seeing price declines, with more affordable housing markets expected to eventually follow the downward trend.”

Lawle