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The Commonwealth Bank is now expecting rates to be increased in June following higher than expected levels of inflation and strong employment figures.

Currently, CBA expects the RBA to lift rates by 15 basis points in June, taking the official cash rate to 0.25 per cent.

If CBA’s forecast comes true the average borrower with $500,000 owing would be looking at an increase of more than $200 a month. (Domain Supplied)

It will then lift rates by 25 basis points twice in the third quarter of 2022, and once more in the fourth quarter, taking the cash rate to a flat 1.0 per cent by the end of this year.

Finally, in the first quarter of 2023, the bank predicts one more rise to take the cash rate to 1.25 per cent.

Data crunched by RateCity.com.au shows that if this forecast is realised, for a borrower with $500,000 owing, monthly repayments could rise by $236 by the end of this year.

This estimate includes principal they would have paid off in this time and assumes that the borrower has 25 years remaining on their loan.

By February 2024, the same borrower could be paying $303 more a month than they currently are.

The RBA has said that an interest rate hike in 2022 is “plausible” but not set in stone. (Peter Rae)

Sally Tindall, Research Director at RateCity.com.au said it would be wise for borrowers on variable rates to try and negotiate with their lender prior to the RBA making a formal decision.

“Mortgage holders should heed Governor Lowe’s advice and build a buffer now to help them tackle the upcoming rate hikes head on,” Ms Tindall told 9News.com.au.

“People on a variable rate can also haggle with their bank or switch lenders to get themselves on a better rate now so they’re coming off a lower base when the hikes come rolling in.

“If you’re on a variable rate, with a steady job and have a good track record of paying down your debt, then you probably have more negotiating power than you realise.”

Borrowers are being urged to shop around for the best rate possible. (Peter Rae)

Ms Tindall recommends borrowers checking what their options are before picking up the phone to their lender.

“Call your bank and ask for a rate cut. Before you call, check what your bank is offering new customers for the same home loan, but also find out what other lenders are likely to offer you. There are plenty of low variable rate options on the table and dozens of lenders are also offering cashback to refinancers,” she said.

“If you are taking out a cashback offer make sure the numbers stack up in your favour.”

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The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

Source: 9News

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