How much more you’ll be paying on your mortgage by Christmas

Homeowners will see their mortgage payments increase hundreds of dollars by Christmas. Find out how much more you will be paying and which Queensland suburbs are most under stress.

Queensland homeowners face having to find almost an extra $400 a month of mortgage repayments by Christmas on average, after the first interest rate increase in more than a decade and more on the way.

On top of growing grocery bills from high inflation, it will put more pressure on family budgets and see more people rack up debt on credit cards and buy-now, pay-later schemes, experts say.

RBA governor Philip Lowe confirmed the historically low cash rate of 0.1 per cent would rise to 0.35 per cent, due to inflation rising faster and higher than expected, and warned there would be more to come.

Commonwealth Bank and ANZ both passed on the full 0.25 percentage point hike to lenders by 7.30pm while Westpac released a statement notifying borrowers it was reviewing its variable interest rate in response to the RBA’s move and NAB was yet to reveal how it would modify mortgage rates.

Labor said it was contributing to a “full blown cost of living crisis” the government had to accept some blame for, while Prime Minister Scott Morrison said he sympathised with homeowners and that tax cuts were acting as a “shield”.

Prime Minister Scott Morrison says tax cuts will act as a shield against cost of living pressures, including the interest rate rise. Picture: Jason Edwards

Several key marginal seats for both parties are in areas already suffering the greatest mortgage stress in the state, including Longman, Ryan, Griffith, Blair and Defence Minister Peter Dutton’s electorate of Dickson.

Toowoomba, Camp Hill, Geebung, Murrumba Downs, Daisy Hill, Narangba, Brighton, Chapel Hill and Albany Creek are all among the suburbs facing the greatest pressure from mortgages, according to a report by Digital Finance Analytics.

An average Brisbane mortgage of $516,000 on a 3 per cent variable rate mortgage, currently paying about $2457 a month, will have repayments increase by $68 a month if the 0.25 per cent rate rise is passed on in full, according to moneysmart.gov.au’s mortgage calculator.

But some economists are predicting multiple rate rises in coming months, with the cash rate to hit 1.5 per cent by the end of the year.

This would see repayments increase to $2849, up $400 a month, under the same circumstances.

Dr Lowe inflation had risen faster and higher than expected, so it was time to end the “extraordinary monetary support” put in place during the pandemic.

“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead,” he said.

He said it was reasonable to expect the cash rate to increase to 2.5 per cent over time.

“How fast we get there and whether we get there will be determined by events,” Dr Lowe said.

Digital Finance Analytics principal Martin North said until recently Queensland had enjoyed relative benign stress levels, but in the past two years price rises had seen households getting larger mortgages in a “shaky market”.

“If they’re not under stress today, it won’t take much to get them into stress,” he said.

“The only thing to do is start hunkering down, reducing debt.”

Despite this he said it would likely push more people into credit card debt and buy-now, pay-later schemes.

“We have a lot of people who have never experienced anything other than rates falling, now they’re beginning to rise,” Mr North said.

“There’s a whole generation who have never lived in that situation. It will be a big shock.”

Sunshine Coast homeowners Max and Lee De Luca, have lived in their renovated four-bedroom Marcoola home since 2006 and are still paying off a mortgage.

Mr De Luca said the hike, coupled with cost-of-living pressures, would hurt the hip pocket and impact how the family of four spends their money.

“It’s horrendous,” Mr De Luca said.

“We will have to monitor our spending and probably won’t be able to eat out as much.

“Interest rates going up and things like fuel increasing does make it difficult for families.”

Max and Lee DeLuca with their sons Miles, 14, and Flynn, 19, and dog Brynnie in their back yard at Marcoola. Picture: Lachie Millard

Shadow treasurer Jim Chalmers said the rising interest rates, combined with high inflation and low wage increases, were a full-blown cost-of-living crisis.

“Scott Morrison’s credibility was already in tatters, but now it’s completely shredded,” he said.

“If only you could pay off your mortgage with Scott Morrison’s excuses.”

Prime Minister Scott Morrison said voters had a choice between his Government’s economic management and a Labor leader who “didn’t even know what the interest rates were just a month ago”.

“I sympathise with Australians when they face higher repayments on their homes,” he said.

“That’s why I provided the relief in our Budget which is a reflection on our strong economic plan.”

He rejected comparisons to the interest rate rise during the 2007 election campaign, when then prime minister John Howard went on to lose the poll.

“At that time in 2007, the cash rate was 6.5 per cent. Today, it’s 0.1 per cent. At that time, there was not a war in Europe. At that time, we had not just been through a global pandemic,” Mr Morrison said.

Originally published as How much more you’ll be paying on your mortgage by Christmas