The average mortgage borrower is facing a cumulative $760 a month hit to their family budget if the Reserve Bank hikes interest rates as expected today.
Most economists and financial traders are tipping the bank to deliver another half-a-percentage-point rate rise at 2:30pm AEDT.
Such a move would be the fifth 0.5 percentage point move in a row by the RBA, taking its benchmark cash rate target to 2.85 per cent, up from just 0.1 per cent at the start of May.
For a fairly typical home owner with half a million dollars of mortgage debt, October's increase would add $148 a month to their repayments, according to analysis by RateCity.
All up, that mortgage borrower would have seen their monthly repayments jump by $760 a month since the RBA started lifting rates in May.
The increase in monthly mortgage repayments is double that for someone with a million dollar loan.
"If the RBA pulls the trigger on yet another double hike, this would see the cash rate rise to its highest level in nine and a half years, while the average owner-occupier rate could soar to over 5.5 per cent," said RateCity's research director Sally Tindall.
Interest rates are likely to rise even further from there.
While some financial institutions are tipping a peak cash rate of 2.85 per cent, such as the Commonwealth Bank, most others are tipping a peak above 3 per cent, with Westpac expecting rates to hit 3.6 per cent by February, before being cut by a percentage point in 2024.
A cash rate peak that high would add nearly a thousand dollars a month to repayments on a $500,000 home loan.
Debt binge ends
The sudden surge in interest rates has already seen a dramatic decline in new borrowing for housing, which fell 3.4 per cent in August and is off 12.5 per cent from the same time a year earlier.
Melbourne-based mortgage broker Ali Kawser has lived that shift.
He spent much of last year working 14-hour days amid red-hot demand for home loans when many interest rates were below 2 per cent and the property market was booming.
But things have changed dramatically since the start of 2022.
"Everyone started feeling that we had a rate rise coming very soon," he said.
"Inquiry from buyers and refinancing queries started slowing down and then, from March or April, it's just gone all the way down."
The sole trader can now get all his work done each day in around six hours.
There is also a new type of client coming to see him for refinancing.
"Every time there is a rate increase from the RBA, they are getting a letter that your repayment per month will increase from this amount to that amount," he said.
"When they are getting the letter, and they're stretching their budget because inflation and groceries have gone up, so they are coming to us to reduce their repayment to go through this stressful time."
Further analysis from RateCity shows many of those people are smart to be looking for a new loan.
The comparison website said increased discounts to new customers meant that someone who took out their mortgage just six months ago is, on average, facing an interest rate 0.26 of a percentage point higher than someone who just took out their loan.
That gap is a much bigger 0.67 of a percentage point between new borrowers and those with mortgages two years old who have neither renegotiated nor refinanced their loan.
On a half a million dollar loan, that equates to around $190 a month in extra repayments.
"For many borrowers it's not practical or cost-effective to switch lenders every few months, however, people should at least haggle with their bank every time it offers a better deal to new customers," said RateCity's Sally Tindall.
"If you haven't negotiated with your bank recently, pick up the phone and be that annoying customer. Your bank might turn you down, but they also might just say yes."
Another group of customers that are getting set to negotiate with their current lender or refinance or those on fixed loans, most of which locked in ultra-cheap interest rates, often below 2 per cent.
"Some people with fixed rates, they're not stressed at the moment, but their fixed period will end sometime sooner or later, and they will be in the same boat," Mr Kawser said.
Merrill Lynch Australia economist Tony Morriss said that is likely to be a significant drag on the economy in the second half of 2023, as those borrowers feel the full sting of rising rates.
"As much as half of all loans were fixed rate over 2021, usually around 2-3 years maturity," he noted.
"As per our estimates, as much as a third of indebted Australian households are expected to experience significantly higher mortgage payments when these fixed mortgage rates reset to floating over the course of 2023."
Rate rises drive house price falls
Another increase in interest rates is set to put more downward pressure on property prices, which CoreLogic figures show fell a further 1.4 per cent on average nationally in September.
Nationally, prices are down nearly 5 per cent from their most recent peak, having risen an average of nearly 29 per cent during the COVID ultra-low interest rate period.
CoreLogic's Eliza Owen said, if interest rates stop rising in early 2023, the property market decline is likely to bottom out in the first half of next year.
"We don't know if it's a plateau or the calm before the storm," she said.
"It's actually a bit of a wait and see. We've got extremely low levels of vendor activity.
"Sellers aren't really selling right now unless they have to, and that's helping to potentially insulate the decline."
What is driving the decline, according to Mr Kawser, is the effect of higher interest rates on the amount prospective buyers are allowed to borrow.
"First homebuyers, they still want to buy a property," he told The Business.
"When we do the servicing, it's significantly lower than what we have done six months ago.
"So property prices are coming down, that's true, but at the same time their borrowing power is a lot lower than what we had six months ago."
Neha Dahiya is a prospective apartment buyer in Melbourne, after her landlords just hiked her rent by $100 a week.
"I want to buy now because I think the prices are starting to drop and sellers are more reasonable," she told The Business.
However, she described the situation with interest rates as "crazy".
"I won't fix my loan. I will go variable at this stage," she said.
She added that, regardless of what the RBA decides this month, she will take her time looking for the right property.
"I won't rush into it. It's a property, it's a mortgage, it'll be there for 30 years," she said.
