Interest rates could mount up over an extended loan Canstar warns. IMAGE: stock
Interest rates could mount up over an extended loan, Canstar warns. IMAGE stock
  • 44% of respondents said the rates will not have an impact on their personal fiscal position
  • 13% have extra savings to make up for the rate rise
  • 11% argue they will be better off, with higher savings account rates

In light of the almost certain cash rate rise today, Canstar has conducted research that has revealed that more than two-thirds of Australians don’t expect to be hurt by increases to interest rates.

This is contrast to the 24% who have said they will find it tough, showing the uneven impact of rate increases across Australia.

Specifically, the survey showed that 44% of respondents expect higher interest rates to make no change to their fiscal position. A further 13% said they have savings to cover increased loan repayments. 11% are expected to be better off, thanks to banks passing on higher interest rates for their savings, although not necessarily in full.

On the flip side, 24% of borrowers will face difficulties, with close to half of these intending to cut back on essentials to cover the higher repayments.

“The burden of interest rate increases is falling unevenly on Australians, with a large majority expecting no change to their situation or even an improvement, while one in four are borrowers who are finding their financial situation stressed as loan repayments rise,” said Steve Mickenbecker, Canstar’s finance expert.

“Almost half of the stressed borrowers are expecting to have to cut back on necessities in order to cover loan repayments, a situation that is going to be difficult to sustain if expenses outside of the home loan also continue to increase.”

Steve Mickenbecker, Canstar

The expected 0.5% rise in the cash rate comes with economic data showing that inflation is high, and so far the only major economic impact of the rate hikes has been a 8.5% fall in home lending in July, according to the Australian Bureau of Statistics (ABS).

“This shouldn’t be enough to deter the Reserve Bank from further increasing the cash rate in September,” added Mr Mickenbecker.

If the 0.5% cash rate hike is passed on in full by lenders, this will increase monthly repayments by $153 for a $500,000 loan, on top of the $499 already added on thanks to May, Juny., July and August increases.

“The blunt instrument of monetary policy has been even more dulled this tightening cycle and is spreading the burden unevenly, with already stressed borrowers again up for more pain while the majority are fearing nothing.”

In a relief for borrowers, there are interest rates still available below 3.5%. The lowest is 3.14% which is 1.37% below the average variable rate of 4.51%

“Both rates will be going up, but refinancing into one of the lowest rates gives borrowers immunity for at least the next few interest rate increases,” said Mr Mickenbecker.

Top 5 Lowest Variable Home Loan Rates ($500k, 80% LVR, P&I)

Provider Loan Rate Comparison Rate
Unloan Unloan Home Loan 3.14% 3.06%
Orange Credit Union Essential Introductory 2 yrs 3.29% 4.29%
G&C Mutual Bank Momentum Home Loan 60-80% Special Offer 3.34% 3.36%
BankVic 2 Year Introductory Variable 3.50% 4.45%
Aussie Select Basic Variable PI 70-80% 3.54% 3.55%

What about savers?

Mr Mickenbecker noted that interest rate increases for savers have been even less predictable.

“Rates passed on by banks to savers have generally lagged the changes passed onto borrowers. Savers will have been lucky to receive half of the Reserve Bank cash rate increases to date, with banks selectively passing interest rate increases through to them,” he warned.

“When it comes to savings, there is no reward for leaving your money with the bank you joined when you got your first job.

“Chances are you can get a rate 1 percent higher than the one you are on now, which on $100,000 savings is $1,000 a year towards the rising grocery budget. It’s worth hunting down.”

Top 6 Saving Account Rates

Provider Account Base Rate Bonus Rate Promo Rate Total Rate Bonus Conditions/ Promo Period
 

BOQ

Future Saver 14-35 yrs old  

0.05%

 

3.45%

 

 

3.50%

Deposit $1,000 and make 5 eligible transactions from your Everyday Account. Applies to balances up to $50k. Bonus criteria waived for 14-17 years olds.
 

Virgin Money

 

Boost Saver

 

0.05%

 

3.25%

 

 

3.30%

Deposit at least $2,000 and make at least 5 purchases on your Go Account for over 25 year-olds. Different monthly criteria applies to under 25 year-olds. They also offer a notice interest rate for providing a 32 days’ advance notice of 0.30% on top of the 3.30%.
 

Westpac

 

Life – 18-29

 

1.00%

 

2.25%

 

 

3.25%

Grow your savings balance and make 5 eligible purchases with a debit card linked to your Choice account each month. Applies to balances up to $30k.
Macquarie Bank Savings Account 2.25% 0.85% 3.10% Promotional rate available for the first 4 months. Applies to balances up to $250k.
Rabobank Australia High Interest Savings Account 2.00% 1.10% 3.10% Promotional rate available for the first 4 months. Applies to balances up to $250k.
 

ING

 

Savings Maximiser

 

0.55%

 

2.55%

 

 

3.10%

Hold an Orange Everyday account, deposit $1,000 from an external source, make 5 ING card purchases and grow your nominated savings balance each month. Applies to one account for balances up to $100k.

 



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