The fact that interest rates have risen for a fifth consecutive time isn’t an M. Night Shyamalan plot twist. In fact, the Reserve Bank of Australia (RBA) flagged that this might happen all the way back in July. At this time, the Governor of the RBA, Philip Lowe said that “inflation is expected to peak later this year.” Thus, to keep Australia from spiralling into a bummer of a recession, our interest rates would also have to keep rising. Which is exactly what we experienced on September 6.
However, just because this info isn’t surprising doesn’t mean it doesn’t suck. A lot of families are going to struggle even more in this cost of living crisis because of said decision. Here’s everything that we know about this D- situation:
How Much Are Interest Rates Rising?
The Board has raised the cash rate target by 50 basis points to 2.35% and the interest rate by 50 basis points to 2.25%. According to The Guardian, this is the highest that the cash rate has been since 2015.
How Will the New Interest Rates Impact Homeowners?
When discussing these increases, our Federal Treasurer, Jim Chalmers, told it how it is. “This will be very difficult news for a lot of Australians with a mortgage,” he explained. “Once again, it isn’t a surprise to anyone, the bank had flagged more increases, the markets had anticipated it, and homeowners were expecting it as well.”
Chalmers also said, “This is tough. This will tighten the screws on family budgets. This will put more pressure on a lot of Australians who are already stretched enough.”
But let’s talk specifics. Using the government’s calculations, here’s much some families will be forking over now:
| Loan of: | If the length of your loan is 10 years, then you’ll now be paying: | Increase if length of your loan is 20 years, then you’ll now be paying: | Increase if length of your loan is 25 years, then you’ll now be paying: | Increase if length of your loan is 30 years, then you’ll now be paying: |
| $300,000 | $2794 per month | $1553 per month | $1553 per month | $1147 per month |
| $500,000 | $4657 per month | $2589 per month | $2181 per month | $1911 per month |
| $800,000 | $7451 per month | $4142 per month | $3489 per month | $3058 per month |
| $1,000,000 | $9314 per month | $5178 per month | $4361 per month | $3822 per month |
Obviously, these amounts are a lot to squeeze out of a budget. As Brianna Casey, the chief executive of Foodbank Australia, told the ABC, “We are seeing a large spike in numbers. We were already seeing a million people a month requiring Foodbank services coming into today’s increase.”
She additionally forewarned, “This will force families to make incredibly difficult decisions.”
Related: Australian Property Have Taken 40 Year Hard Drop
Related: Given Interest Rates Hike, Should I Buy a House in Australia Now or Wait?
Will Interest Rates Rise Again?
Unfortunately, this is more than likely not the end of said saga. As Lowe stated, “The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”
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