RBA Governor Michele Bullock spoke at the Committee for Economic Development of Australia in Sydney today, with inflation, interest rates and the economic outlook firmly in focus.
The timing is particularly relevant for borrowers. The RBA Monetary Policy Board meets on 28 and 29 September, with its next interest rate decision due at 2.30 pm AEST on Tuesday 29 September.
Inflation remains the key concern
The important takeaway from today’s discussion wasn’t an announcement about interest rates. It was the continued focus on inflation.
Bullock said some of the inflation risks the RBA has been concerned about may now be materialising, pointing to factors including sustained higher energy prices, global uncertainty and continuing domestic demand pressures. She was also careful not to pre commit the Board to a particular decision next week.
The cash rate is currently 4.35%, following a total of 0.75 percentage points of increases since February. Core inflation remains above the RBA’s 2 to 3% target range.
Financial markets are currently pricing in a strong possibility of another increase at the September meeting, but that remains a market expectation. The RBA has not announced another rate rise. The decision will be made by the Board next week.
What could another 0.25% mean for a homeowner?
Even a relatively small movement in interest rates can make a noticeable difference when the loan balance is substantial.
For example, on a $800,000 home loan over 30 years, a 0.25 percentage point increase could add approximately $125 to $140 per month to principal and interest repayments, depending on the interest rate applying to the loan.
That’s around $1,500 to $1,680 more each year if the higher rate remained in place.
Your actual repayment change will depend on factors including your:
- current loan balance
- remaining loan term
- existing interest rate
- repayment structure
- lender, and whether any cash rate movement is passed through in full.
This is a good time to understand your position
You don’t necessarily need to wait for an RBA announcement to understand what a change could mean for you.
If your home loan repayments are already taking up more of the household budget, or you’re wondering whether your current loan is still appropriate, it may be worth reviewing your position before the next decision.
That could include looking at your current repayments, available refinancing options, debt consolidation, access to equity or how a higher interest rate may affect future borrowing capacity.
The next RBA decision is Tuesday 29 September. For borrowers, the important question isn’t simply whether rates move next week. It’s understanding what any movement would mean for your own circumstances.
Thrive Broking can help you review your current position and understand the finance options that may be available to you.
We’re also available outside standard business hours where something is urgent. If you’re contacting us after 6 pm, we recommend sending a text message so we can respond when available.
This information is general in nature and doesn’t take into account your individual objectives, financial situation or needs.