HOME owners have been hit with a tenth consecutive rate hike from the Reserve Bank of Australia, taking the cash rate to the highest level in more than a decade.
The RBA announced an increase of 25 basis points on Tuesday, lifting the cash rate to 3.60 per cent as it attempts to tame inflation.
Canstar modelling shows the average Newcastle and Lake Macquarie home owners' mortgage repayments will increase by $107 a month, taking monthly repayments up to $4,132 under the changes. This is assuming an 80 per cent variable loan on the region's median house price of $818,893.
The RBA lifted the cash rate from a record-low 0.1 per cent to 0.35 per cent in May last year.
Rising interest rates are already leaving home owners financially strained and there is more pain forecast as short-term fixed loan rates come to an end.
According to the RBA, an estimated 800,000 home loans totaling $350 billion will fall off a 'mortgage cliff' this year as loans switch from a fixed interest rate to a higher variable rate.
Borrowers who took out loans during the last two years are set to be particularly vulnerable.
Home owner Danni O'Connor, of Belmont, and her husband recently came off a three-year fixed-rate mortgage of 3.81 per cent.
"Our new interest rate is 5.69 per cent so it has almost doubled our monthly payment," Mr O'Connor said.
"We are paying an additional $1,500 per month since coming off our fixed rate."
She is bracing for further increases which could see her return to work full-time to cover higher mortgage repayments.
"It is worrying if they continue to increase," she said.
"We are currently OK but if they continue to increase as they have we will have to make a few cutbacks and I'll have to return to work full-time.
"I have already increased my days at work to help maintain our repayments. We have a large family and with the cost of living continually going up it does make life hard."
Cutcher and Neale Accounting and Finance Services director Dean Menzies said the wave of mortgage holders coming off low fixed-rate loans had already begun.
"The tsunami is kind of happening now and it is something that we are going to see in the next nine months in particular," Mr Menzies said.
"A lot of cheap money is about to come off.
"What we are seeing is that all of the fixed rates are similar and they are really just competing on the best variable rates.
"Some banks are giving higher discounts if the loan-to-value ratio is a bit lower. For instance, if the loan-to-value ratio is below 70 per cent they will give further discounts to people trying to refinance."
Mr Menzies said banks are offering market-competitive rates however, the majority of low fixed-rate mortgage holders that need to refinance will see their repayments double.
"Clients are looking to refinance but what they're finding is you really can't find any loans these days under five per cent, or very rarely, so everyone is in the same boat," he said.
"They're coming off interest rates of 2 to 2.5 per cent fixed and their repayments and their interest rates are going to almost double or, in some cases, even more than double.
"That is pretty much unavoidable."
Another issue on the horizon is the rise of borrowers being stuck in 'mortgage prison'.
Mr Menzies said a growing number of home owners would be unable to refinance as interest rates reach their highest levels in a decade.
"We are also going to see a greater prevalence of people being in what I would call 'mortgage prison'," he said.
"What that means is they have received funding with interest rates at record lows, and everything has been done right in terms of responsible lending at the time, however, interest rates have gone up so quickly that they actually can't refinance the debt that they have currently got to another bank so they are stuck where they are.
"We are certainly seeing some of it and it is going to occur, unfortunately, with more regularity."
