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15-year high: Mortgage pain to deepen ahead of likely rate rise
The cash rate is widely expected to rise tomorrow to a 15-year high as the RBA meets again, with some mortgage holders set to pay an extra $500 a month.
Mortgage holders are likely to see another rate rise tomorrow, after major banks revised their forecasts and the Reserve Bank of Australia (RBA) conceded inflation was still too high.
The move would take the cash rate beyond the hikes seen in 2022–2023, and to the highest setting the nation has seen since October 2011.
Since then, home loan debt has soared by 138 per cent, with Australian Prudential Regulation Authority (APRA) data showing the total value of residential mortgages was $1.05 trillion in 2011, and $2.51 trillion in July this year.
Big 4 banks cast predictions
Last week, Australia and New Zealand Banking Group (ANZ) and the Commonwealth Bank of Australia (CBA) brought forward their rate rise predictions from November to September.
The move brought them in line with the other major lenders, National Australia Bank (NAB) and Westpac, with all four banks predicting a 0.25 percentage point rate hike to 4.60 per cent.
Similarly, RBA governor Michele Bullock said occurrences since the latest August board meeting suggested that previously projected risks were materialising, despite three hikes this year.
Her comments came after the latest data showed the consumer price index (CPI) rose 3.5 per cent in the 12 months to July 2026, from 3.8 per cent in the 12 months to June.
“At the time of the August board meeting, we assessed that the risks to that outlook were skewed to the upside,” Bullock said.
“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising.
What another rise would mean for mortgage holders
According to Canstar, a 0.25-percentage-point increase would add $91 to monthly repayments for a borrower with a $600,000 loan and 25 years remaining at the start of this year’s hikes.
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Following a fourth hike this year, the same mortgage holders would have a total of $364 added to their monthly repayments.
Anyone with debt that is $825,000 or more, with 25 years remaining on their loan, would have over half a thousand dollars extra a month.
Further, if the cash rate rose by 0.25 percentage points and banks passed it on in full, it would push the average owner-occupier variable rate to 6.49 per cent.
However, at least a few lenders are projected to hold onto a rate under 6 per cent, with the lowest likely to be 5.94 per cent.
To prepare for the likely rate rise, Canstar urged borrowers to check what their repayments would look like if the RBA hiked rates both this week and in November.
Additionally, it said they should ask their bank for a lower rate, or even consider refinancing, as they may be able to find better rates.
Canstar data insights director Sally Tindall said the string of rate hikes this year has had a cumulative impact on mortgage holders, who now face double the debt they had 15 years ago.
“Owner-occupiers who have let their loan sit on autopilot for years are likely to be on a rate that’s over 7 per cent after this next rate hike,” she said.
To counter the hike, Tindall encouraged borrowers to negotiate their rates with their bank or switch to another lender.
She said that with another rate hike, average rates would be around 6.25 per cent for owner-occupiers.
“A borrower with a decent-sized debt could potentially pocket thousands of dollars in savings in the next couple of years, even when factoring in switch costs.”
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