min read
· Posted on
February 21, 2024

Interest rates August 2022: How will the RBA cash rate rise impact me?

The RBA interest rate decision is in… and there has been another cash rate rise by 0.5% to 1.85%.

What's the key learning?

  • The RBA has just raised the official cash rate again. It’s now up 0.5% to 1.85%
  • Usually when the Reserve Bank of Australia increases the official cash rate, banks and lenders increase their home loan interest rates
  • If you have a variable home loan or a portion of your loan that’s variable, that will change
  • That means your average mortgage will end up increasing almost $500 per month since the start of the year

Over the past few months, the first Tuesday of every month has become a pretty big deal.

It’s become like a monthly Grand Final for the 6 million mortgage holders in Australia who are waiting on the whim of the Reserve Bank of Australia (RBA).

Me at 2.29pm on the first Tuesday of every month

And now the Reserve Bank of Australia has hiked interest rates again. The 0.5% increase brings the official cash rate to 1.85%.

Are we surprised? Not really! Are we disappointed that home loans are going to become more exxy? Absolutely. 

But inflation is popping off faster than The Kid Laroi’s career and rates need to go up to help keep a lid on the problem. 

Now the RBA has said it wants to get the cash rate up to 2.5% over time.

How will the interest rate rise impact my home loan?

If you’ve got a variable rate home loan (or if part of your loan is variable), it might be time to tighten your budget a little. Why? Well, when the official cash rate goes up, the banks usually follow suit and increase home loan interest rates by the same percentage. If you have a fixed-rate loan, it’ll stay fixed for the fixed period.

Here’s a breakdown of how your repayments will likely change based on a 25 year repayment term:

Source: Mozo

Wait… What’s the official cash rate?

Quick recap: the official cash rate is the amount of interest that banks pay when they borrow money (yep, banks - they’re just like us!). 

The RBA decides what the official cash rate is on the first Tuesday of every month (except January). Once it makes its call, banks and lenders tend to change their interest rates on savings accounts and home loans (generally, in line with the official RBA cash rate).

All information contained in the Flux app is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice. While we do our best to provide accurate information on the podcast, we accept no responsibility for any inaccuracies that may be communicated.

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