Home owners are set to brace for a more than a hundred-dollar add-on to their mortgages amid predictions the central bank could invoke a double rate hike to try and curb inflation.
The Reserve Bank of Australia is poised to tighten monetary policy on Tuesday with expectations the official cash rate will lift by either 25 or 50 basis points.
The rising cash rate will impact millions of home borrowers across the country who will face added interest payments and comes amid a cost of living blowout, which has seen escalating prices for a number of essential goods and services.
Someone with a mortgage size of $750,000 could face a monthly jump in repayments between $100 and $200 following the expected hike that will be announced by RBA on Tuesday afternoon.
July's prospective hike will likely bring the cash rate to above 1 per cent for the first time since 2019 and mark the third consecutive month where the central bank has attempted to cool down inflation, which is running at an annual rate of 5.1 per cent.
Figures from RateCity show if a 0.5 percentage point rise is invoked by the RBA, someone with a $750,000 mortgage will be paying nearly $500 more in interest than they were in May.
RateCity research director Sally Tindall said more rate hikes are on the horizon and warned interest repayments on loans particularly variable rates will only become more expensive to service.
"If the board opts for a half a percentage point hike, for someone with $750,000 owning they're looking at an increase of $205 and a total hike over the three months of $499," she said. "That's like buying a new washing machine every single month."
The average new owner-occupier loan size in the ACT sits at $599,898. Mortgage holders with a $500,000 loan size are likely to see repayment jumps between $68 and $137.
Economists are predicting Australia's cash rate by the end of year will go beyond 2 per cent.
"Borrowers need to ready themselves for the cash rate to get to 2.35 per cent by December and around 2.5 per cent, potentially even higher, by early next year," Ms Tindall said.
"If that happens, someone with a $750,000 mortgage could see their repayments increase by a total of $1,028."
Australian National University's RBA shadow board recommended a hike, given the need to bring inflation back into the target band of 2 to 3 per cent.
RBA governor Philip Lowe has previously outlined that he expects annual inflation to reach 7 per cent by the end of the calendar year.
Supply shortages and commodity shocks sparked by the Ukraine conflict have added inflation pressures across the global economy.
Westpac's chief economist Bill Evans flagged a 50 basis point lift is justified given the risk of entrenched inflation and anticipates the RBA will move again on rates in August.
"We think the need to contain those inflationary expectations in the face of another outsize inflation print and the assessment that policy is still stimulatory will indicate to the reader that the Board is open to a third 50-basis-point move in August," he said.
Lending data from the Australian Bureau of Statistics on Monday showed home lending over the month of May rose 1.7 per cent compared to the prior month. That translates to around $32.4 billion added to loan books nationally.
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