August home loan snapshot: As interest rates climb the pressure mounts on home owners

The Reserve Bank of Australia (RBA) increased the official cash rate for the third time last month and economists predict there’ll be another 0.50% increase in August.

Several experts from NAB and Westpac predict we will continue to see hikes until February 2023, with a predicted 3.35% cash rate peak.

For now, rates continue rising across the board, and many homeowners at the end of their fixed rate terms are entering a home loan market with no more rates below a ‘2’. In fact, the RBA’s deputy governor warned that homeowners rolling from fixed to variable rates might see a 40% increase in their mortgage repayments.

While that might sound discouraging for those with home loans, the RBA says most households should be able to withstand higher repayments. 

On the other hand, those looking to become new homeowners might be surprised as recent Corelogic data found that property prices have sharply fallen in the last month.

The report says there was a 1.2% decrease in property prices nationwide. Sydney prices–the most expensive in Australia–dropped by 1.9% over the past four weeks. The last time it dropped this rapidly was more than 40 years ago. Melbourne also dropped by 1.2% and Brisbane by 0.6% over the same period.  

So what do variable rates and fixed rates look like after the RBA hike? Find out below.

The fall of the ultra low fixed home loan rates

The age of ultra low fixed rates is gone. Last year, several fixed rates started with a ‘1’, but now the lowest fixed rates in our database start with a ‘3’.

According to Mozo’s database, the average fixed rates for owner occupiers with an 80% LVR and a $400,000 loan are:

• 1-year - 4.80% p.a.
  
• 2-year - 5.40% p.a.
  
• 3-year - 5.75% p.a.
  
• 4-year - 6.12% p.a.
  
• 5-year - 6.26% p.a.

“Fixed rates are basically out of the market now,” says Mozo’s banking expert Peter Marshall. “They’re going to settle in the area which they are now, which is the 5% - 8% range depending on the term.”

The graph below shows that fixed rates skyrocketed at the start of 2022 and have not slowed down. One can only assume that we won’t see a drop soon.

Recent fixed and variable interest rate movements

We’ve seen increases across all the home loan products in our database. In fact, in the last month, there were 1771 increases in variable home loan products and 2988 in fixed home loan products tracked in the Mozo database. Many of the variable home loan interest rate hikes were in line with the RBA’s new cash rate.

Here are some notable changes from the last month.

Variable home loans

• UP launched its first home loan for refinancers owner occupiers with a variable rate of 3.45% (3.45% comp rate*)
  

• Bank of Queensland increased its Economy Variable loan to 40bp for owner occupiers and 45bp for investors. 
  

• Yard rates are up 64 to 104bp based on borrower type, now starting at 3.34% (3.38% comp rate*).

Fixed rate home loans

• Suncorp passed large increases. Rates are higher by between 145 and 167bp for 1 year, 121 to 141bp for 2 years, 105 to 127bp for 3 years, and 91 to 112bp for 5 years. 
  

• Westpac increased most 1 year rates between 50 and 60bp, 2 year rates by 40 to 60bp, 3 year rates by 30 to 60bp, 4 year rates by 40 or 50bp, and 5 year rates by 50 or 60bp. 
  

• NAB increased all fixed options. For owner occupiers making P&I repayments rates are up 170bp for 1 year, 115 to 130bp for 2 years and 135bp for 3 years. 4 and 5 years are up by 120bp.

Lowest home loan rates

Even though the interest rate averages for home loans have gone up, there are still a few variable rates below a ‘3’ in the Mozo database and fixed rates that start with a ‘3’. Below are the lowest variable and fixed mortgage rates (P&I, LVR <80%) among lenders we track.

Lowest variable rates — Mozo database (August 1, 2022)^^

Lowest and average fixed rates — Mozo database (August 1, 2022)^^

These are the lowest rates available in our database for borrowers with an <80% LVR. More competitive rates are available for borrowers with LVRs below 70% and 60%.

Are you thinking about a property or looking to refinance your existing mortgage? Use Mozo’s handy home loan comparison table to examine lenders side-by-side, or use our refinance calculator to see how much you could save.

^^Interest rates are based on an owner occupier making principal and interest repayments on a $400,000 loan with an 80% LVR. Check out our dedicated Australian home loan statistics page for more information on average mortgage rates.