Rates rise again — what it means for your mortgage and borrowing power
The Reserve Bank of Australia (RBA) has lifted the cash rate to 4.1% – the second consecutive hike this year – and most big four economists are tipping another rise in May that would fully reverse last year's cuts.
For borrowers, this will add pressure. According to Cotality, on the average new mortgage of $730,000, this latest rise adds $117 to monthly repayments. It also cuts borrowing capacity by around $18,000 for a median-income household, before any further moves.
That said, it's not all bad news for homeowners. Structural housing market dynamics remain strong. Undersupply and population growth continue to support values, particularly at the entry level. Domain's chief economist Dr Nicola Powell expects prices to keep rising, just at a more moderate pace.
If your mortgage hasn't been reviewed recently, now is a good time to do so. The right home loan structure can make a difference when rates are moving.
About the author – Alex Veljancevski is a Sydney Mortgage Broker with Eventus Financial, which assists first home buyers, investors, upgraders and borrowers seeking to refinance to a better deal on their home loan.