Biggest hit in 20 years

Reserve Bank lifts official cash rate by 0.5%

QUEENSLANDERS have been hit with an historic double whammy as the official cash rate climbs another half a per cent for the second straight month, adding an extra $130 a month to the average mortgage repayment.

The last time interest rates rose 50 basis points prior to June was 22 years ago when the cash rate was 7.3 per cent and homeowners across the state had to find an extra $40 a month to pay down an average $110,000 mortgage.

Interest rates might not be that high today, but Queensland mortgage holders will have to pay an extra $130 a month on an average $480,000 home loan after Tuesday’s 50 basis point rise, Proptrack analysis shows.

That takes the cash rate to 1.35 per cent, which is the highest level since June 2019 and the first time since 1990 that mortgage holders have been hit with two, half a per cent hikes in a row.

According to Proptrack, the combined May, June and July rises will lift the average monthly repayments for Queenslanders by $330.

When rates last rose by half a per cent in February 2000, the median home price in the state was $140,000 and monthly repayments on an average 30-year home loan would have been around $770.

Proptrack economist Angus Moore said the last time mortgage holders were hit with a 100 basis point hike was in 1994 when the Reserve Bank of Australia (RBA) decided to lift the cash rate from 6.5 per cent to 7.5 per cent, but that was in one meeting.

In 1994, the average mortgage was about $88,000 and a 1 per cent increase in mortgage rates would have increased monthly repayments by just over $60, which is equivalent to about $120 today.

“The RBA is responding to a much stronger inflation outlook than they had anticipated even as recently as the start of the year,” Mr Moore said.

“It’s not just driven by overseas factors. We're seeing the price of domestic services and goods growing as well.

The majority of economists had predicted the RBA would make the decision to raise the cash rate by another 50 basis points this month, and are forecasting further rises throughout the rest of the year.

Proptrack senior economist Eleanor Creagh said the market was pricing in a cash rate of 3 per cent by December.

“Though the RBA have signaled a desire to ‘get ahead of the curve’, it’s likely the cash rate ends the year closer to 2 per cent than 3 per cent,” Ms Creagh said.

The housing market is already responding, with the latest Proptrack data showing home prices nationally fell 0.25 per cent in June.

LJ Hooker head of research Mathew Tiller said cost of living pressures combined with rising interest rates had impacted buyer demand for housing.

“Overall, we are seeing dwelling values begin to fall, however, each state and territory tells its own story,” Mr Tiller said.