Rate Rises to Drive More Interest Paid on Average Loans | Newcastle Herald

news, business, economy, RateCity, lending, banks, banking, interest rates, inflation, Reserve Bank of Australia

Mortgage holders in the Hunter could be forced to shell out an additional $800 in monthly interest payments according to rate hike forecasts from Australia’s biggest banks. Analysis of RateCity’s Big Four cash rate forecasts for Australian Community Media showed borrowers are set to be stung with hundreds of dollars in additional interest charges, once the Reserve Bank starts raising rates . Calculations are based on the most recent average loan size in each state and territory, with New South Wales set to see the worst potential rate hike, an average mortgage in the most populous state could result in additional fees between $477 and $800. RateCity’s research director, Sally Tindall, stressed that borrowers should build up a savings reserve and stressed that a rise in short-term rates was inevitable. “No one is going to like the idea of ​​putting their hard-earned savings back into their bank as extra interest charges,” Ms Tindall said. “Don’t sit and wait for rates to rise, build up a reserve as soon as you can by putting extra money into your offset or directly into your home loan. The lower your loan amount when the rate goes up, the more the less shock you will have.” By December 2023, Commonwealth Bank expects the RBA to inflate rates to 1.25%, while NAB and Westpac assume the cash rate will hold at 1.5%. ANZ, at the higher end of the spectrum, estimates that the cash rate should rise to 2%, which would result in higher mortgage rates offered by lenders on loans to homeowners and investors. Growing interest has been in focus following speculation from the RBA that a “plausible” rate hike could occur later in the year. Higher-than-expected levels of inflation above the RBA’s 2-3% target range led the market to believe a rally could come as early as August. Earlier RBA action was also announced after the US Federal Reserve announced it could raise rates as early as March. However, RBA Governor Philip Lowe quashed the speculation, pointing out that US inflation was double Australia’s. The Big Four’s longer-term rate forecasts also show that the peak rate by 2024 could be between 1.75% and 3%. Ms Tindall noted that the RBA is aware of rising debt levels due to the housing boom which has seen values ​​rise by more than 25% over the year. “Over the next two years, the cash rate is expected to be between 1.25 and 2%, which is historically still incredibly low,” she said. According to the Australian Prudential Regulation Authority, household savings are at an all-time high, with nearly $119 billion more in savings accounts than a year ago. IN THE NEWS: Our reporters work hard to bring local, up-to-date information to the community. Here’s how you can continue to access our trusted content:

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