How much your mortgage repayments will increase after interest rate rise

The RBA’s decision to increase rates yet again will hit Aussie borrowers where it hurts. Here’s how much your mortgage repayments could go up by.

Borrowers have been hit with yet another interest rate rise with the Reserve Bank of Australia increasing rates to keep up with the cost of living, and experts warn there’s more pain to come.

Today’s decision to increase rates by 50 basis points pushes the cash rate above 1 per cent to 1.35 per cent.

It’s the third time in as many months that interest rates have surged, after the first increase occurred in May which saw rates rise to 0.35 per cent and then to 0.85 per cent in June.

And July’s hike won’t be the last, with experts predicting a cash rate of 2 per cent by the end of the year.

What does this mean for your mortgage repayments?

The interest owed on loans varies depending on the type of mortgage and the bank you’re with, but you can use our rate calculator below to find out how much your monthly repayments will increase by.

How does July’s rate rise compare to those in the past?

While interest rates remain low on a historic basis, Proptrack’s director of economic research Cameron Kusher says it’s the sudden surge following an 11-year hiatus that caught borrowers off-guard.

“The challenge for people is A, they didn’t expect (interest rates to rise) until 2024. B, when rate rises did start to happen, the expectation was that the increase would be slow. And C, interest rates are increasing a lot earlier, and a lot quicker than anyone was really expecting,” Mr Kusher told news.com.au.

Reserve Bank Governor Philip Lowe also didn’t expect rate rises to occur for at least another two years, so it’s safe to say that this event was one not many were expecting.

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Reserve Bank Governor Philip Lowe didn’t anticipate an interest rate rise until 2024. Picture: photographed by Adam Yip.

Preparing for impact

Whether you’re on a fixed or variable rate, now is the time to start preparing for not only July’s interest rate rise but for future increases on the horizon.

Mr Kusher suggests speaking to a mortgage broker or the bank to discuss what options are available to help reduce your spending.

Some of these choices include changing your repayments from monthly to weekly instalments or looking into a loan that comes with an offset account.

“Variable rate mortgages often have a redraw facility or an offset facility so you can park money in there and reduce the interest component based on the amount of additional cash you have sitting in there,” Mr Kusher said.

Borrowers are being urged to revisit their mortgage to help reduce spending. Picture: iStock.

What to expect for the future

Economists predict that there’ll be at least four interest rate hikes by the end of the year, bringing the cash rate to over 2 per cent if the RBA continues on their 50 basis point trend.

“For people looking to buy, they’re not going to be able to borrow as much as they previously could when interest rates were lower,” Mr Kusher said.

“But equally, property prices are expected to fall as well so the cost of purchasing is likely to reduce.”

As for those who already have a mortgage, Mr Kusher’s advice is to shop around or look into refinancing with a mortgage broker to get the best deal.