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The borrowing potential for Australians earning the average salary of $104,807 is set to decrease by approximately $12,000 from tomorrow onward. This change is anticipated if the Reserve Bank of Australia (RBA) decides to raise interest rates by 0.25 percentage points, according to a fresh analysis by Canstar.
This development has led economists from all four major Australian banks to forecast a 0.25 percentage point increase in the cash rate, potentially bringing it to 3.85 percent.
Moreover, NAB is projecting another 0.25 percentage point rate hike during the RBA’s upcoming meeting in May.
Should these predictions hold true, the borrowing capacity for someone on an average income could diminish by $24,000.
For couples where both partners earn the average wage, the reduction in borrowing power would double, amounting to $48,000.
This is based on a person taking out an owner-occupier loan with no other debts, no dependents and minimum expenses.
The forecast rate hike is also casting shadows over mortgage holders’ prospects.
An owner-occupier with a $600,000 mortgage and 25 years remaining on their loan would see their minimum monthly repayments rise by $90, assuming banks pass the hike on to their variable customers.
For those with a $1 million loan, that figure is $150.
“One RBA hike in isolation isn’t going to blow up home buying budgets en masse, but it could push some buyers to the sidelines until they get a clearer idea of just how many hikes might be on the horizon,” Canstar’s insights director Sally Tindall said.
“Growth in property prices could well slow on the back of a return to rate hikes, but it’s unlikely to see prices fall.
“Home buyers should take this as a warning sign that rates could go higher and stay that way for a considerable period of time.”
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