Following the Reserve Bank of Australia’s decision to raise interest rates by half a percentage point on Tuesday and raise its target rate to 0.85 per cent — significantly higher than most economists had predicted — adjustable rate borrowers are wondering if and when their banks plan pass on the rise.
And it looks like more rate hikes are on the horizon.
The latest rate hike is the biggest rate hike in 22 years – and forecasters are predicting the cash rate could continue to rise, potentially hitting 2.5 percent by the middle to end of next year.
In that case, a borrower with a $500,000 loan balance could see monthly payments increase by $652 a month by Christmas next year.
Will your bank survive the rise?
Australia’s ‘Big Four’ banks will all raise variable rates on home loans by half a percentage point.
ANZ, Commonwealth and National will all take effect on June 17th and Westpac on June 21st.
Most other big banks will pass the entire increase on to borrowers.
- Macquarie Bank of June 17
- Bankwest of June 17th
- Bank of Queensland 14 June
- ING of June 15th
- Suncorp as of June 17th
- St. George of June 21st
If your bank is not listed here, it is probably worth calling your bank or visiting a branch.
It is often easier to find information about rate hikes through media releases than on the front page of the bank.
Your interest rate questions answered
What should I do if I’m having trouble making repayments?
Banks have generally indicated that they want to help lenders meet their obligations by asking them to call the bank to discuss their situation.
There are a few different ideas you can do to manage your debt from ABC business reporter Emily Stewart.
First, make two-week repayments instead of monthly. The year has only 12 months but 26 weeks. So you’ll end up making two extra repayments for the year without even realizing it.
Another option is using a contra account. You can still use it as a regular transaction account, but having the money there reduces the interest you pay on your loan.
We also suggest Renegotiate your rate to ensure you have the best deal with the lowest price, commit to special payments and make sure you are Amortization of principal and interest, not just interest.
What about interest on savings accounts?
As a win for those finding it impossible to make their way to that long-awaited holiday, both Macquarie and ING have hiked interest rates on their transaction and savings accounts.
In what they refer to as “Australian first,” Macquarie announced on Thursday that it will raise the interest rate on its transaction account to match the interest rate on its current high-yield savings accounts.
Beginning June 17, Macquarie transaction account customers will earn 1.5 percent interest on balances up to $250,000 — a significant jump from the previous 0.2 percent interest rate and more than 145 basis points (1.45 percentage points) above the industry average for transaction accounts.
Meanwhile, ING Australia announced that it will increase its top ongoing variable savings rate by three-quarters of a percentage point from June 15, meaning eligible Savings Maximiser customers could receive a variable rate of 2.10 per cent.
The bank will also introduce rate increases on its Savings Accelerator offerings and personal term deposits (for new and existing customers), including a fixed rate on personal term deposits of 2.75 percent for 12 months.