How much your mortgage repayments will go up as rates rise to 0.85%

The average Aussie will have to pay up to $200 a month more on their mortgages as the Reserve Bank hikes interest rates again.

The burn of last month’s interest rate has got worse for homeowners, with the Reserve Bank of Australia (RBA) lifting rates for the second time in as many months on Tuesday.

The RBA hiked rates by 50 basis points to 0.85 per cent just 35 days after raising them in May, when they moved from a record low 0.1 per cent to 0.35 per cent – the first increase in 11 years – in an effort to begin “normalising monetary conditions” in the wake of Australia’s remarkable economic recovery post-pandemic.

How much will my mortgage repayments go up by?

You can use our rate calculator below, to find out how much your monthly repayments would increase by.

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Governor of the Reserve Bank, Philip Lowe, announced the first rate rise in more than a decade in May. Picture: NCA NewsWire / Jeremy Piper

Rate rises will hurt the hip-pockets of mortgage holders.

How much could/did the interest rate rise by?

Experts were way off in their last predictions and PropTrack economist Paul Ryan told news.com.au ahead of the RBA’s meeting that they are still split about the possible June rise.

Mr Ryan said although some economists are predicting another 25 basis point rise (bringing the rate to 0.6 per cent), others are bracing for a 40 basis point rise (lifting the rate to 0.75 per cent) to “offset” the exceptionally low rate during the pandemic.

“Forty would be basically to being the cash rate back to a multiple of 25 basis points,” he said. “And the RBA likes to move in multiples of 25.”

The last time the RBA increased the cash rate in November 2010, raising it by 25 basis points to 4.75 per cent, above the 3.93 per cent average.

Instead we saw a massive 50 basis points rise.

How to brace for impact

Mr Ryan said although the interest rate rise will likely sting new mortgage-holders, their lenders should have assessed and factored in their ability to pay a higher interest rate. It could bruise, but it shouldn’t break them.

When applying for a loan, lenders should factor in potential rate rises and borrowers’ ability to repay them. Picture: Ian Currie.

“Essentially, lenders have considered this repayment shock and kind of built that into their lending approval decisions,” he said.

“But nonetheless, I think it’s going to come as a bigger shock to those households with new mortgages.”

He said it’s best for households to anticipate rates to rise higher than expected and consider how well placed they’ll be to find extra money to repay loans if they do.

“It’s arguably helpful for households to start to tighten their belt in anticipation of those additional pressures on their household budgets, rather than them coming as a shock and becoming out of balance,” he said.

Originally published as How much your mortgage repayments will go up as rates rise to 0.85%