Leading economists expect the cash rate to peak at 3.6 per cent by early next year
Victorian homeowners are being warned of more pain on the way as experts reveal their predictions on how high the cash rate will go and when it will reach its peak.
Victoria
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The average Victorian homeowner will enter the new year facing a $1250 blowout in their mortgage payments.
The hip pocket pain comes as the Reserve Bank hiked the cash rate 0.25 per cent on Tuesday afternoon.
The average new home loan in Victoria weighs in at around $637,300, data from the Australian Bureau of Statistics shows.
A slew of leading economists now expect the cash rate to peak at 3.6 per cent by early next year.
Among this group is Westpac’s closely watched chief economist Bill Evans who expects the cash rate to hit that level in February.
If that comes to pass a homeowner on the averaged sized new mortgage will see their interest rate payments climb by $1254 in less than a year, analysis by financial comparison site RateCity shows.
A homeowner on a $500,000 loan will see their cumulative monthly repayments rise $984 while someone with a $750,000 mortgage will be slugged an extra $1476 in payments.
The hit rises to $1968 a month for a $1m home loan.
The calculations assume the homeowner is paying principal and interest on a 25-year loan.
The nation’s central bank has hiked the cash rate every month since May, taking it from a historic low of 0.1 per cent to 2.35 per cent.
The RBA on Tuesday increased the cash rate target by 25 basis points to 2.60 per cent.
RateCity research director Sally Tindall said borrowers should remember there is a two to three-month lag between when the RBA hikes the cash rate and when this extra money comes out of their bank account.
“You might think you’ve successfully cleared five RBA hikes when really, you’ve only conquered three, potentially even two,” she said.
“Work out what your repayments will be after this latest hike, but also what they could get to if the cash rate hits 3.60 per cent.
“If you can, start making these higher repayments now, so you know ahead of time you can afford them. If you can’t, start making cutbacks today.”
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Originally published as Leading economists expect the cash rate to peak at 3.6 per cent by early next year
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