Cash rate rise: What the RBA's June announcement means for Canberra mortgage holders

The Reserve Bank of Australia announced a 50-basis-point rise on Tuesday - the largest single increase in 22 years - taking the cash rate to 0.85 per cent.

The increase caught most economists off guard, and came as the RBA expressed renewed concerns about Australia's rate of inflation.

It comes just a month after the RBA's first cash rise in more than a decade.

Calculations by Canstar for The Canberra Times shows ACT mortgage holders are likely to pay $2868 more each year if they own a house, or $1668 more each year for unit owners, if the increases are passed on by banks.

The calculations are based on principal and interest repayments on an 80 per cent loan amount, assuming the loan term is 30 years.

Based on Canberra's median house price, currently $1,070,403, ACT households would pay $239 more each month on their variable home loan, once the banks adjust their interest rates.

That means Canberra house owners could pay $2868 more each year.

For unit holders, based on the median ACT unit price of $622,437, repayments are expected to rise $139 per month.

That's an additional $1668 per year on top of current repayments.

In May, the RBA board said it was planning a "further lift in interest rates over the period ahead" to ensure inflation in Australia returned to target over time.

Canberra financial advisors and property experts say many home owners have been preparing for rate rises and loan serviceability assessments are expected to reduce the risk of mortgage stress.

Following the May interest rate rise, some buyers have considered switching their variable loan to a fixed rate.

Financial adviser Nick Lucey, director of Nest Advisory, told The Canberra Times, it may be too late for mortgage holders to make the switch, as banks have already factored in further cash rate rises.

"So depending on the bank that you might go with ... you might be paying a premium of 1 to 1.5 per cent to fix for two years," he said.

"If you're trying to beat the bank on interest then you're really betting that the RBA is going to raise rates quite significantly and quickly ... it's like paying an insurance premium to protect yourself."

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