The RBA increased the cash rate on Tuesday August 2nd by 0.50%, taking it up to 1.85%.
The Reserve Bank Governor indicated in his post-meeting statement that this was probably not the last rate rise. “The board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path,” he said.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market”.
We are encouraging Court Financial Services clients to be aware of what their repayments will be at higher rates. The table below provides a guide. These are general examples so please do not hesitate to contact us if you would like to know specific details for your loan repayments.
Monthly repayment levels at various standard variable interest rates
(Assumptions: owner occupied loan, principal and interest with a 30-year loan term)
| Loan size | Monthly Repayments at increasing variable rates
|
||||||
| 3% | 3.5% | 4% | 4.5% | 5% | 5.5% | 6% | |
| $500000 | $2109 | $2246 | $2388 | $2534 | $2685 | $2839 | $2998 |
| $600000 | $2530 | $2695 | $2865 | $3041 | $3221 | $3407 | $3598 |
| $700000 | $2952 | $3144 | $3342 | $3547 | $3758 | $3975 | $4197 |
| $800000 | $3373 | $3593 | $3820 | $4054 | $4295 | $4543 | $4797 |
| $900000 | $3795 | $4042 | $4297 | $4561 | $4832 | $5111 | $5396 |
| $1,000000 | $4217 | $4491 | $4775 | $5067 | $5369 | $5678 | $5996 |
You can also use the loan repayment calculator on the CFS website to run scenarios on what your loan repayments will be at various variable rates. Consider what your repayment level would be if your home loan interest rate was 6%. If your loan structure allows it, consider setting your repayment level to this amount now to help ensure you can manage further rate increases.
We do not know how high rates may be in the future, however planning for a 6% rate provides a good buffer above current rate- at present. It’s important to understand, this may change over time and your planning may therefore need to change. It is essential to keep up to date with news about interest rates so that your planning remains effective.
Using your offset facility.
If your loan has an offset facility, consider making the extra repayments to your offset account. The savings you have in your offset account offset the interest you pay on your home loan. Talk to us about the benefits of using your offset account to manage future rate rises.
If you are currently on a fixed rate
If you are on a fixed rate, it is just as important to plan and consider what your loan repayments will convert to once the fixed term is over. Talk to CFS to discuss your options.
Talk to us
If you would like to talk through options to help manage your repayments at the higher levels, or if you have concerns about your ability to afford future rate increases, contact us. We can’t stress enough the importance of planning ahead. Please contact our off 9429 9775 or email kris@courtfs.com.au
