Corey and Sarah Skinner and three-month-old daughter, Everley and dog Kingsley, have recently refinanced. Picture by Wayne Taylor

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The average mortgage holder could soon be paying close to 7.5 per cent interest on their home loan.

Comparison site Canstar has warned the cash rate could go as high as 4.6 per cent based on the historical average, representing an extra $1,386 per month in repayments since the Reserve Bank started hiking interest rates last year.

Analysis from Canstar shows the average cash rate has been around 4.6 per cent over the past 33 years – a full 1.5 percentage points higher than the current cash rate of 3.1 per cent.

Canstar finance expert Steve Mickenbecker said this meant there was still room for the RBA to move.

Home loan pain to set to get worse. Picture: NCA NewsWire / Gaye Gerard

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“The Reserve Bank keeps reminding us that its cash rate decisions are all based on the data, and the December quarter inflation increase of 1.9 per cent, and annual rate 7.8 per cent won’t be enough to change the Bank’s course,” he said.

“More rate rises look inevitable.”

“Australia’s cash rate is 3.10 per cent after a record run-up, yet it’s still well below the historical average of 4.6 per cent.”

He said this would bring the average variable rate for existing borrowers as high as 7.48 per cent “and make many mortgage holders nervous.”

Research shows the repayments on a $500,000 loan over 30 years would jump to about $3,490 a month on a 7.48 per cent interest rate for borrowers paying principal and interest.

Steve Mickenbecker, group executive, financial services, at Canstar

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The Canstar analysis shows that even if record high rates from the early 1990s were excluded, the adjusted average rate would still be well above the current rate at 4.1 per cent.

“Before 2009, the cash rate had never been below 4.25 per cent, and it only hit subsequent lows in response to the Global Financial Crisis,” he said.

“It took another crisis, Covid, to knock it down to 2020’s low.”

He said while the RBA may take their foot off the pedal as recession fears grow stronger, any pause in hikes would likely be temporary.

“Two of the big banks are already predicting a 3.85 per cent cash rate by May, while Deutsche Bank has predicted four rate rises to reach a cash rate of 4.1 per cent by August,” he said.

“By now a borrower with a $500,000 loan has seen their repayment go up on average by $888 since April 2022 to now be paying $2,991 per month.

“Another 1.5 per cent will add a further $498. It’s time for borrowers

to get into as low a priced loan as they can find.”

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