The Reserve Bank of Australia decided at its monthly board meeting to keep the cash rate, which is the interest rate on unsecured overnight loans between banks, at the historic low of 0.1 per cent. For now at least.
Meanwhile, the latest CoreLogic data shows that national home values have rocketed 21.6 per cent over the year to October.
So if the cash rate is increased by just 0.25 per cent, and the lenders pass this on in full to the borrowers, then a residential homeowner with a $1m mortgage on an average variable rate of 3.09 per cent, would see their monthly loan repayments rise by approximately $137 to reach $4,402.
But if the cash rate increased by 1 per cent, then the borrower with a $1m mortgage would see their monthly repayments rise by approximately $561 to $4,826.
The RBA, however, has repeatedly said a hike is unlikely before 2024 as it wants actual inflation “sustainably” within the 2-3 per cent target range.
Some economists believe a hike could come as soon as late 2022, but most appear to be tipping 2023.