Mortgage rates are on the way up — here is where to get the cheapest deal

Mortgage rates are on the rise in Australia as funding costs and speculation about an impending RBA cash rate rise in the next few months puts pressure on banks.

While there was no change in the cash rate at yesterday’s RBA meeting for April, rate hikes are coming.

The big four bank economists have forecast a lift in the official cash rate – which remains at the historically low level of 0.1% – from as early as June this year.

All lenders now believe that 2022 will feature not one but multiple rate hikes, to lift Australia's cash rate to around 1.5% by the end of 2023.

While anyone on a fixed rate can enjoy temporary immunity to any rate increases, variable rate mortgage holders are about to see a surge in their repayments.

To avoid getting caught out, mortgage holders could haggle with a lender now, or refinance, to help minimise the impact of the rate rises ahead.

But remember that interest rates are only part of the equation.

Here at Metropole we understand that as a mortgage holder, you need flexibility and a loan that suits your needs - that's why you should use an investment savvy finance broker.

Here, comparison site Ratecity has put together a list of the lowest home loan rates on offer.

RateCity research director, Sally Tindall, said:

The government’s pre-election cash-splash adds another variable into the mix, however, it’s unlikely to derail the RBA’s desire for more data before making a decision.

The next CPI data is out at the end of this month, but it’s hard to see the RBA making a move on the back of this alone.

The RBA does not want to spring a rate hike on Australians without ample warning.

More increases to come, banks warn

Banks have been steadily increasing rates over the past 5 months, and they warn there could be plenty to come yet.

They suggest that property owners could face higher mortgage repayments as early as June as financial markets and economists warn a rapid run-up in inflation could force the Reserve Bank to lift official rates above 2% within the next 12 months.

Combined with growing concern about the upcoming federal election and the rising cost of living, CBA said it believed the Reserve Bank would have to start increasing interest rates by the middle of the year.

Even a 1% rise could add hundreds of dollars a month in repayments on the average new mortgage, the bank warned.

And such a hike is worrying news for homeowners and investors.

Now if you’ve been reading his regular blogs or watching his Property Insider videos you’ll know that neither Michael Yardney nor Dr Andrew Wilson agrees with this.

They believe low “real” wages growth will put a lid on “official” interest rate rises any time soon.

However, whether you’re planning to buy a new property or refinance an existing one, Ratecity’s latest list of the cheapest loans available should help.

Because it’s vital to know where to find the best value home loans, especially amid a rising market.

RBA rate hike — how much it could cost you

RateCity has crunched the numbers on CBA’s predicted RBA rate rises to determine how much existing variable rate mortgage holders may be impacted by rate rises.

For a borrower with $500,000 owing on their mortgage with a rate of 2.96%, their monthly repayments could rise by $235 by the end of this year.

By February 2023, the same borrower could be paying $302 more a month than they currently are.

RBA rate hike — how it’ll affect borrowing capacity

Rising interest rates will significantly decrease how much banks will let people borrow.

This could also in turn dampen property prices as buyers who were planning to borrow at capacity will no longer be able to access as much money.

Based on CommBank’s predicted RBA rate rise forecast, RateCity research has discovered how much fewer people may be able to borrow.

If variable rates rise by 0.90% by the end of 2022 (cash rate hike to 1.00%), a single person earning $100,000 would be able to borrow an estimated $67,800 less (this assumes a 20% deposit).

ALSO READ: What’s wrong with Australian mortgages? They’re fixed for shareholders, not homeowners

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.