The RBA raises the official cash rate to 2.35% which is another 50 basis points. This is the fifth straight month the RBA has increased the cash rate and the fourth double interest rate rise in a row.
The official cash rate for this month is the highest it has been since January 2015. The hike in interest rates according to RBA Governor Philip Lowe will aid in bringing the inflation rate back to goal and creating a more stable supply and demand equilibrium in the Australian economy.
The board also expects that there will be an increase in interest rates further over the months ahead but it is not on a pre-set path.
If you don't have a fixed-rate mortgage, your interest rate will likely increase soon due to the Reserve Bank of Australia's increase in the official cash rate (RBA).
The official cash rate set by the RBA is what banks use when lending money to one another, that's why in response to an increase in the cash rate banks often raise their interest rates.
With 25 years left on a mortgage for $500,000, the 50 basis point raises your monthly payments by $144. Your mortgage has increased by $610 since May. (source: theguardian)
ANZ and Westpac are both forecasting the RBA cash rate will increase to 3.35% by November and February (respectively) next year, meaning homeowners with variable rate mortgages can expect their repayments to rise.
This means that we should expect another two double 50 basis point increases.
CBA's head of Australian economics Gareth Aird stated, "We believe that the data will show that there is no need to keep raising the policy rate, providing the RBA pauses for at least a few months in their tightening cycle when the cash rate is 2.6% or 2.85%."
It's important to be aware of the possibility of interest rate increases if you're looking for a mortgage or are considering getting one soon.
The Reserve Bank of Australia has indicated that rates are likely to rise again in the months ahead, so it's important to factor this in if you're looking at taking out a mortgage.
Of course, if you're already a mortgage holder, then you'll be acutely aware of the impact that interest rate rises can have on your repayments.
If you're worried about how an increase in rates might affect you, get in touch with us now! We will gladly help you with your financial situation and look at what's best for you.