Following the Reserve Bank of Australia's decision to raise the cash rate by half a percentage point Tuesday, moving the cash rate target to 0.85 per cent — considerably higher than most economists predicted — borrowers on variable interest rates are wondering if and when their banks are planning to pass on the rise.
And it looks like there will be more rate rises on the horizon.
The latest rate rise is the biggest rate hike in 22 years — and forecasters are predicting the cash rate could continue to rise, possibly hitting 2.5 per cent by mid-to-end of next year.
If this happens, a borrower with a $500,000 loan balance could see their monthly repayments rise by $652 a month by Christmas next year.
Will your bank pass on the rise?
Australia's "big four" banks will all raise home loan variable interest rates by half a percentage point.
ANZ, Commonwealth and National will all make the changes effective from June 17 and Westpac from June 21.
Most of the other major banks will pass on the entire rise to borrowers.
- Macquarie Bank from June 17
- Bankwest from June 17
- Bank of Queensland from June 14
- ING from June 15
- Suncorp from June 17
- St. George from June 21
If your bank is not listed here, it's probably worth giving your bank a call or visiting a branch.
It's often easier to find information on interest rate rises via media releases than it is on the bank's front page.
What should I do if I'm struggling to meet repayments?
The banks have generally made a point of saying they want to help lenders meet their obligations, with invitations to call the bank to discuss their situation.
There are a few different ideas you can do to manage your debt from ABC business reporter Emily Stewart.
Firstly, make fortnightly repayments instead of monthly. There are only 12 months in the year, but 26 fortnights. So, you'll end up making an extra two repayments for the year without even realising it.
Another option is using an offset account. You can still use it as a regular transaction account but, just by having the money sitting there, it reduces how much interest you're paying on your loan.
We also suggest renegotiating your rate to make sure you're on the best deal with the lowest rate, committing to extra repayments and making sure you're making principal and interest repayments, not just interest.
What about interest rates for savings accounts?
In a win for those finding it impossible to claw their way to that long-awaited holiday, Macquarie and ING have both raised interest rates on their transaction and savings accounts.
In what they say is an "Australian first", Macquarie revealed on Thursday it will be increasing the interest rate on its transaction account to be the same as its ongoing high-interest savings account rates.
From June 17, Macquarie transaction account customers will earn 1.5 per cent interest on balances up to $250,000 — a considerable jump from the previous 0.2 per cent interest and more than 145 basis points (1.45 percentage points) above the industry average for transaction accounts.
Meanwhile, ING Australia announced it will increase its highest ongoing variable savings interest rate by three-quarters of a percentage point from June 15, meaning eligible Savings Maximiser customers could earn a variable interest rate of 2.10 per cent.
The bank will also introduce rate increases across its Savings Accelerator offerings and personal term deposits (for new and renewing customers), including a 2.75 per cent fixed personal term deposit rate for 12 months.
