Will the third time prove to be the charm? Australia’s major banks are anticipating that the Reserve Bank of Australia (RBA) will maintain the cash rate at 4.1% during its forthcoming September 2023 meeting, marking this the third consecutive time. However, there is also a chance that the RBA might raise the rate Let’s look at what both scenarios mean for Aussies.
Australians have been hit with another national cash rate hike today and will be feeling more financial pain. Our analysis suggests that the average homeowner will be paying an additional $92 per month on their mortgage. For the average homeowner who has a rate above six and a half percent, they are now paying over $4000 a month on repayments.
For some Australian households, this will be over half of their monthly salary and with the rise in other corresponding costs such as insurance premiums, groceries and energy bills, it doesn’t take much to see how squeezed these already put-upon households are.
We’re often hearing homeowners struggle with what they should cut and where to keep their mortgage payments on track, which is not surprising when you look at the data and see the average mortgage holder would have seen an annual increase of over $15,700 on their repayments since April 2022. While the RBA’s decision to hold the cash rate will be welcome for mortgage holders, there’s still other rising costs, like energy bills to contend with.
There may well be another one or two cash rate rises this year, so it’s never been more important for homeowners to get on top of all their expenses, not just their home loan.
There is a small silver lining though. Property prices are rising again, and that means some mortgage holders who were struggling to refinance because their loan-to-value ratio (LVR) was so high may be able to get a much better rate than they could access months ago.
Lenders tend to be a bit wary of anybody with an LVR of 80% or above but we’ve seen a lot of instances where some lenders have valued properties slightly higher than others and that’s made a massive difference. It’s why it’s crucial to pick up the phone to a mortgage broker, as they have a pretty good idea how lenders are valuing properties in different suburbs.
For example, one of our brokers managed to refinance a home loan in Western Sydney from 6.4% to 5.24% after he found a lender who valued the property that little bit higher.
My message to homeowners is don’t feel you have to fight this alone. Get a good mortgage broker in your corner, and see if you can get a better deal on other big expenses like health insurance, energy, and car insurance. There are often hundreds of dollars worth of savings to be made that can really help give a bit more breathing room to household budgets.