Following the Reserve Bank’s double rate hike, big banks have lifted all their variable mortgage rates by 0.5 percentage points.
As a result, the average variable borrower will have seen their rate rise by 1.25 percentage points since the start of May.
That means someone with a $500,000 mortgage, with 25 years remaining, will see their repayments increase by an estimated $333 in total across the three hikes, RateCity.com.au said.
While variable rate borrowers with loans with CBA, NAB, and ANZ will be charged a higher interest rate starting today, it will take weeks for their monthly repayments to rise. In fact, the increase in monthly repayments many of these customers are currently seeing resulted from the May hike.
This is because banks typically give 20 to 32 days’ notice before lifting their monthly repayments, despite charging their customers the higher rate from the effective date.
Even then, the increase to their monthly repayment might not take effect for another few weeks, depending on when they are due.
UBS has predicted interest rates will peak at around 3.5 per cent in March next year, but said this will still hit the housing market hard.
“We still think market pricing of about 3.5 per cent – if delivered – would likely crash housing, and see the economy nearing a recession,” George Tharenou, chief economist at UBS, told The Australian.
If interest rates were to rise to 3.5 per cent it would likely see the average variable mortgage rate hit a whopping 6 per cent and could plunge the economy into recession, according to the investment bank.
“Interest payments across the economy next year for the household sector will close to double from now,” Mr Tharenou said.
“We have never seen such a sharp increase in repayments. That really crushes household cashflow next year when you have cost-of-living issues.”
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