As the festive season approaches, Australians are usually on the lookout for the perfect gifts to share with loved ones. However, there’s one ‘gift’ that Aussie mortgage holders would rather not find under their Christmas tree this year: higher interest rates.
Despite the Reserve Bank of Australia (RBA) maintaining the official cash rate in December, major financial institutions have decided to hike both fixed and variable rates, leaving many homeowners with an unexpected and unwelcome financial burden.
According to Canstar, a financial comparison site, the data indicates a pause in the fixed-rate cutting cycle that many had enjoyed earlier in the year. Sally Tindall, Canstar’s data insights director, suggests that while the cycle is on hold, there may be hope for mortgage relief in the new year.
In the meantime, the rate hikes have been widespread. The Teachers Mutual Group, which includes Uni Bank, Health Professionals Bank, and Firefighters Mutual, increased key new customer variable rates by 0.10 percentage points. Newcastle Permanent made the most significant move, lifting fixed rates by 0.20 percentage points.
Amidst these increases, Queensland Country Bank stands out as the lone financial institution to cut variable rates before Christmas. This is a rare occurrence in a year that has seen a trend of fixed-rate reductions.
The impact of these changes is significant. The number of rates below 5.75 per cent on the market has decreased from 192 to 178 in just one week. For owner-occupiers paying principal and interest, the average variable interest rate is now 5.84 per cent, with the lowest variable rate being 5.69 per cent offered by Australian Mutual Bank.
On the flip side, term-deposit holders have seen a mix of rate changes, with two providers increasing six rates by an average of 0.17 per cent, while six providers cut rates on their 15 collective products by an average of 0.13 per cent.
The RBA’s decision to hold the official cash rate at 4.35 per cent comes as Australia’s trimmed mean inflation remains stubbornly above the target range of 2 to 3 per cent. The board has acknowledged that while inflation has fallen from its peak in 2022, underlying inflation rates are still higher than desired, hovering around 3.5 per cent.
For homeowners, the implications of these rate hikes are tangible. Canstar estimates that a 0.25 per cent cash rate cut could potentially reduce monthly repayments for a $600,000 loan over 30 years by $101, bringing it down to $3984. However, with rates on the rise, borrowers may need to brace themselves for higher repayments instead.
With interest rates on the rise, what steps are you taking to manage your mortgage? Share your strategies in the comments below—we’d love to hear from you!
Also read: Interest rates put the squeeze on aged care
