Key takeaways
The RBA Board decided to hold interest rates steady at 4.1% in July to provide additional time to assess the outlook for the economy.
The Governor's Statement strangely removed much of the commentary on upside risks to inflation that was present in the two previous months at which the RBA tightened.
Moving forward, the RBA will be guided by its forecast for inflation and the labour market.
The RBA Board decided to hold interest rates steady at 4.1% in July to provide additional time to assess the outlook for the economy.
In the Governor’s statement today, the RBA said:
“further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.”
The Statement strangely removed much of the commentary on upside risks to inflation that was present in the two previous months at which the RBA tightened.
According to RateCity.com.au, this pause will give variable borrowers time to catch up on the 12 hikes the Board has unleashed in the last 15 months.
There is typically a two-to-three-month lag between each cash rate hike and when that extra money comes from people’s bank accounts.
This means most variable borrowers have only started paying for rate hike number 10.
These borrowers still have two more rate hikes to conquer without further increases from the Reserve Bank.
Total increase in monthly repayments since May 2022
| Loan size | Repayment increases still to come (May + June) | Total increase across all 12 hikes |
| $500,000 | $151 | $1,134 |
| $750,000 | $227 | $1,701 |
| $1,000,000 | $303 | $2,269 |
Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April.
Borrowers should not consider this game over
However, despite the hold, borrowers are encouraged to plan for at least one, if not two more hikes to their monthly repayments.
Budgeting for these potential increases now will give borrowers confidence they can tackle the next few months ahead.
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If they can’t, it gives them time to put plans in place or reach out for help.
Estimated monthly repayments required for two additional rate hikes
| Size of debt at start of hikes | Min mthly repayment required at cash rate of 4.60% |
| $500,000 | $3,622 |
| $600,000 | $4,347 |
| $700,000 | $5,071 |
| $800,000 | $5,796 |
| $900,000 | $6,520 |
| $1M | $7,245 |
| $1.1M | $7,969 |
| $1.2M | $8,694 |
| $1.3M | $9,418 |
| $1.4M | $10,143 |
| $1.5M | $10,867 |
Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes there are two more hikes this year.
RateCity.com.au research director Sally Tindall, said:
“The RBA has handed households a much-needed breather to catch up on the 12 rate rises the Board has already fired off – if you’ve got a mortgage, use this time wisely.
The reality is, the vast majority of variable borrowers have only started paying for their 10th hike.
Their monthly repayments are likely to rise two more times, even if the cash rate doesn’t move a muscle, which, in itself, is an unlikely scenario.
With at least one more rate hike expected, anyone with a mortgage should pick up the phone to their bank and ask point blank for a rate cut.
If you get one, make sure you put that money straight back into your mortgage until you need it.
Right now, having a buffer in your home loan is exactly what the doctor ordered.
Some tips on how to deal with your mortgage
RateCity.com.au provided some tips when dealing with your mortgage:
The 3 things you do before you pick up the phone to haggle:
- Check what rate you’re paying.
- Check what your bank is offering new customers.
- See what other lenders are offering – arm yourself with at least two or three rates that would apply to your mortgage.
Now you’re ready to call your bank and haggle.
The 3 things you can say to get a decent cut:
- Mention that you are considering refinancing and list a few lenders and their rates. If you name-drop a couple of competitors, they might be more inclined to take notice.
- Ask to speak to the retention team – they’re the ones with the license to hand out bigger discounts.
- If they still don’t budge, ask for a mortgage discharge form. That should be enough to call your bluff.
