Westpac is the first big bank to announce it will pass on the latest interest rate hike.
Australian’s worst fears were confirmed on Tuesday with the Reserve Bank of Australia pushing up interest rates for the eighth consecutive month.
The RBA increased rates another 0.25 per cent in December taking the official cash rate to 3.1 per cent.
Westpac announced its home loan variable interest rates will increase by 0.25 per cent for new and existing customers from 20 December.
“We know our customers are paying extra attention to their household budget in the lead-up to Christmas and looking at ways to manage their money into the New Year in the changing economic environment,” said Westpac consumer and business banking chief executive, Chris de Bruin.
“While the majority of our customers are managing well through this cycle with a strong jobs market and savings built up during the pandemic, we understand some customers may find it more difficult.
“We have an experienced customer support team ready to work with each customer one-on-one to offer help if they are in a tough spot.”
Another 0.25 per cent rise would typically add $75 to monthly repayments for each $500,000 borrowed, according to RateCity.
All four of the major banks passed on the 0.25 per cent interest rate rise in November.
Since April interest rates have skyrocketed to an average discounted mortgage rate to 6.55 per cent, up from 3.45 per cent in April, meaning Aussies are forking out a lot more money to meet their mortgage repayments.
December’s interest rate hikes will see homeowners with $750,000 mortgages be slugged with an extra $1418 to monthly repayments.
Compare the Market’s latest research revealed half of Australians fear they won’t be able to afford rising mortgage payments within the next 12 months.
The data also revealed that just one in three Aussie mortgage holders have tried to negotiate a lower rate this year.
Compare the Market’s, general manager of money, Stephen Zeller said it was important to talk to your lender.
“Aussie homeowners need to be looking at their rate and checking it twice this Christmas, otherwise they could end up paying thousands of dollars in extra interest over the life of their loan unnecessarily,” he said.
“Those on a fixed, or a climbing variable rate, need to wake up and act, especially with a large portion of fixed rates due to expire mid-next year.
“The rude reality is that fixed rates which are due to expire at the end of 2023 can expect a median increase of around $650 in their monthly repayments.”
Finder’s head of consumer research Graham Cooke said the RBA’s final cash rate decision for 2022 was not the festive news Aussies were seeking.
“Aussies with a $500,000 mortgage will be paying almost $900 more per month compared to what they were paying in April,” he said.
“To comfortably afford this you’d need to be earning a minimum income of just over $180,000 – significantly more than the average salary.”
Mr Cooke added Aussies were having to devote a bigger share of their budgets to essential living expenses.
“The current series of rake hikes has added almost $11,000 to the annual cost of a $500,000 mortgage – a huge amount of extra money for mortgage holders to fork out,” he said.
“Renters are also doing it tough; vacancy levels are at record lows and the latest rental affordability index shows all capital cities saw a drop in affordability in this year.
“Between what Aussies earn and what they spend – for many there’s nothing left over at the end of the month.”
Two of the major banks, ANZ and Westpac forecast the cash rate to reach as high 3.85 per cent by May 2023.
Canstar analysis shows if rates were to hit that hight it would add an extra $245 to monthly repayments for someone with a $500,000 over 30 years.
It could see the total increase to repayments from May 2022 through to May 2023 reaching $1133 per month.
Canstar’s finance expert Steve Mickenbecker said a 3 per cent increase to interest rates in the space of eight months was “unprecedented and has put a strain on many households”.
Story Credit: news.com.au