RBA interest rates: How much more you will pay as interest rate rises to 1.85%

Australian homeowners have been slugged with another super-sized rate rise meaning they will need to find hundreds more to meet repayments.

Homeowners have been hit with another super-sized interest rate from the Reserve Bank of Australia meaning they will fork out hundreds more on repayments.

The decision to increase rates by 0.5 per cent pushes the cash rate to 1.85 per cent.

It’s the fourth 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, while in July rates were pushed to 1.35 per cent.

The August hike won’t be the last, with experts predicting interest rates to 2 per cent by the end of the year.

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.

A borrower with a $1 million loan over 30 years can expect their monthly repayment to rise by $297, which when added to the May, June and July rate increase would see their monthly repayments rise by $1000 since April, according to Canstar.

Those with a $2 million loan will see their monthly repayments rise by $593 a month, which added with the last three rate rises would be a total jump of $1998 to pay.

Meanwhile, a $750,000 loan would see repayments jump up $297 a month meaning their overall repayments have jumped by a total of $750 since the RBA began hiking rates.

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It’s the fourth rate rise this year. Picture: Getty Images

Canstar’s finance expert, Steve Mickenbecker said the August increase would again hit borrowers’ hip pockets and stretch household budgets already reeling from consecutive increases in May, June and July.

Nine in ten banks have passed on almost the whole of the 1.25 per cent increase of the last three months to borrowers and this month will be no different,” he said.

“If the $297 in monthly repayments arising from a 0.50 per cent rate increase on a $1 million loan sounds affordable, borrowers will be finding the extra $1000 a month to cover the four months of increases far more of a challenge to pay packets already being drained by higher power, grocery, petrol and insurance bills.

“A 0.50 per cent increase also signals to anyone watching that the Reserve Bank is not done yet and there are further increases on the way, until the inflation rate is recaged below 3 per cent from its current 6.1 per cent.”

Steve Mickenbecker, group executive, financial services, at Canstar.

Borrowers’ strategy now should be to move their loans at the lowest rate they can qualify.

However, they should also retain the flexibility to make extra repayments when that opportunity resurfaces, he advised.

“Variable rates more than 1 per cent below the average are still available, and moving that way can at least cover a couple of Reserve Bank increases,” he added.