interest rates
Interest rates continue to rise. Image – Canva.
  • Assuming the rate rises on Tuesday, it will be the first time it has risen for five consecutive times since 2009
  • Assuming a 25 point rise, it will mean the cash rate has risen by 2% - or 200 points - this year
  • The average big bank variable may be as high as 5.41% if the full rise is passed on

With the Reserve Bank of Australia (RBA) expected to raise the cash rate in September for the fifth consecutive month, Mozo has warned mortgage holders and households to prepare.

This will be the first time since the beginning of 2009 that the RBA has lifted the rate for five sitting months in the row – the RBA doesn’t meet in January.

“There’s not many households across the country that wouldn’t be feeling the effect of the rate increases by now. If the cash rate increases another 25 basis points as expected, the total increase we’ve seen this year is 200 basis points,” said Claire Frawley, Mozo Personal Finance Expert.

For owner-occupiers paying principal and interest on a $400,000 loan, with the average variable interest rate of 4.55%, this would see a further $57 monthly increase, $684 per annum – if the rate were to increase by 25 basis points next month.

Even an owner occupier that started paying the average variable rate of 3.02% in May would not be paying around $442 extra monthly if all 200 basis points were passed on from the lender.

“With another rate rise expected this month, borrowers need to prepare their household budgets once again for an increase to their home loan repayments,” Ms Frawley added.

Based on the average median house value of $800,000 in Sydney, Melbourne and Canberra. Borrowers with a larger loan of $800,000 would see an additional $106 to their monthly mortgage repayments, taking repayments to $4,575, if a rate increase of 25 basis points were to occur.

Borrowers who hold a mortgage with one of the big four banks – Commonwealth Bank, Westpac, NAB or ANZ – could face an annual increase of $708, assuming a 25 basis point rise and the banks were to pass it in full.

The average big bank variable would top 5.41% under this scenario.

big bank rise
Source – Mozo.

The lowest interest variable rate in Mozo’s database is 3.34% is P&N Bank, which is 182 basis points below the current big four average variable rate of 5.16%, and 121 below the average variable interest rate of 4.55%.

A 25 basis points increase to this rate would see an extra $648 to yearly mortgage costs.

“Households that are feeling the pinch should really consider refinancing to a lower interest rate, even as rates are expected to continue to increase. All savings add up and could help alleviate the overall rising cost of living,” concluded Ms Frawley.

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