Interest rates: Homeowners hit with second straight 0.5 per cent hike

Homeowners have been hit with a historic double whammy, as the official cash rate rose another half a per cent for the second straight month.

Homeowners have been hit with a historic double whammy as the official cash rate climbs another half a per cent for the second straight month, adding an extra $160 a month to the average mortgage repayment.

It comes on the back of June’s 50 basis point lift, taking the cash rate to 1.35 per cent — its highest level since June 2019 and the first time since 1990 that mortgage holders have been hit with two, half a per cent hikes in a row.

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The combined May, June and July rises will lift the monthly repayments on an average $560,000 home loan by $380, according to PropTrack.

RBA governor Philip Lowe. Photo: Lisa Maree Williams/Getty Images.

PropTrack economist Angus Moore said the last time mortgage holders were hit with two 50 basis point hikes was in 1994 when the Reserve Bank of Australia (RBA) decided to lift the cash rate from 6.5 per cent to 7.5 per cent, but that was in one meeting.

Mr Moore said there was no evidence of two, back-to-back 50 basis point rises since 1990.

“The RBA is responding to a much stronger inflation outlook than they had anticipated even as recently as the start of the year,” Mr Moore said.

“It’s not just driven by overseas factors. We're seeing the price of domestic services and goods growing as well.

PropTrack economist Angus Moore.

The majority of economists had predicted the RBA would make the decision to raise the cash rate by another 50 basis points this month, and are forecasting further rises throughout the rest of the year.

PropTrack senior economist Eleanor Creagh said the market was pricing in a cash rate of 3 per cent by December.

“Though the RBA have signalled a desire to ‘get ahead of the curve’, it’s likely the cash rate ends the year closer to 2 per cent than 3 per cent,” Ms Creagh said.

Eleanor Creagh, PropTrack senior economist.

A survey by comparison site, Finder, found two-thirds of economists and industry commentators believe the cash rate will peak at 2.5 per cent or higher — most likely early next year.

“These are tough news for many homeowners, with 1 in 4 already struggling to meet their monthly mortgage payments in June,” Finder head of consumer research Graham Cooke said.

“There’s no light at the end of the tunnel just yet, with our panel forecasting at least two more rate rises to come. This will put further downward pressure on a rapidly deflating housing market.”

National home values fell 0.25 per cent in June, according to PropTrack.

The housing market is already responding, with the latest PropTrack data showing home prices nationally fell 0.25 per cent in June and are more than half a per cent below their peak.

LJ Hooker head of research Mathew Tiller said cost of living pressures combined with rising interest rates had impacted buyer demand for housing.

“Overall, we are seeing dwelling values begin to fall, however, each state and territory tells its

own story,” Mr Tiller said.

“Prices are falling in Sydney and Melbourne where supply is rising above demand resulting in a decline in values.

“In Adelaide, Perth, and Brisbane we continue to see very low amounts of properties on the market for sale and values have continued to climb.”

Originally published as Interest rates: Homeowners hit with second straight 0.5 per cent hike