“There’s more pain on the way for variable home loan customers with another double hike tipped for next month. If this happens, it will be the sharpest rise to the cash rate since 1994, when the RBA hiked by 2.75 percentage points in the space of five months.”
RateCity research director Sally Tindall
Westpac’s head of consumer and business banking Chris de Bruin said it considered several factors in making the decision, including the cash rate rise, ongoing increases in the cost of funding, as well as the needs of both borrowers and depositors.
Macquarie Bank also followed suit, increasing variable home loan rates by 0.5 percentage points.
Treasurer Jim Chalmers said on Tuesday the country was strong enough to withstand a second consecutive 0.5 percentage point increase in official interest rates.
He said he had spoken to the heads of Australian banks about passing on the interest rates to savers who had faced record-low returns for several years. While about 34 per cent of households have a mortgage, more than three quarters have savings.
RateCity research director Sally Tindall said owner-occupiers with a $500,000 mortgage over 25 years could expect repayments to rise by $137 a month.
Borrowers with a mortgage of $1 million will see an increase of $273 per month.
“There’s more pain on the way for variable home loan customers with another double hike tipped for next month. If this happens, it will be the sharpest rise to the cash rate since 1994, when the RBA hiked by 2.75 percentage points in the space of five months,” Tindall said.
Analysts and economists on Wednesday predicted the Reserve Bank board would raise the official cash rate by 0.5 per cent again in August, before more modest increases of 0.25 per cent in the months following.
Jarden chief economist Carlos Cacho said in a note there was a risk the board could raise the interest rate next month by 0.75 percentage points if the June quarter inflation data was higher than expected, but its prediction remained a 0.5 percentage point rise.
“After the volatility in recent months and being caught off-guard by the higher inflation in Australia (despite well understood global factors), the RBA seems to be getting comfortable in this hiking cycle,” he said.
UBS economist George Tharenou expects the RBA to start cutting rates by 0.5 per cent in the second half of next year.