December home loans snapshot: Interest rates have seen a 2.75% jump since last year

This year, borrowers have endured a difficult seven months of interest rate hikes that have seen the cash rate go from 0.10% to 2.85%. The Reserve Bank is widely expected to lift rates again this month, and there’s a good chance it will bring the hammer down again early next year. 

The combined 275 basis point jump in the cash rate nearly matches the 3% serviceability buffer banks add to their rates to stress test potential borrowers. 

Australians who bought at the top of the property cycle are likely to be impacted in particular. For his part, RBA governor Philip Lowe recently apologised to those who took out loans in the past two years expecting rates to stay low.

The central bank boss was saying as recently as December last year that rates were unlikely to rise until 2024. He explained at a Senate estimates committee on Monday that this messaging was heavily conditional on the state of the economy.

Right now, the average variable rate loan (OO, P&I) sits at 5.41% p.a. — a staggering 2.34% higher than it was when the year began.

Fixed rates are also barely recognisable, with the average 2-year rate now 5.80% p.a. (up from 2.59% p.a. in January) and the average 5-year rate now 6.49% p.a. (up from 3.38% p.a. in January).

Below, we take a look at some of the key changes in the mortgage market over the past month.

Fixed home loans now average above a ‘5’

The ultra-low fixed rates many had gotten accustomed to during the pandemic period have long disappeared. These days, most fixed rates begin with a ‘4’ or ‘5’. 

At the time of writing, the average fixed rate for owner occupiers with an 80% LVR and a $400,000 loan are:

• 1-year: 5.41% p.a.
  
• 2-year: 5.80% p.a.
  
• 3-year: 6.02% p.a.
  
• 4-year: 6.31% p.a.
  
• 5-year: 6.49% p.a.

Recent home loan rate movements

Variable rate home loans

• Great Southern Bank held back part of the increase for some borrowers. The smallest increase of 5bp was on its Offset Variable for owner occupiers with an LVR under 70%, now 4.49% p.a. (4.54% p.a. comp rate*). 
  
• HSBC first increased its rates before decreasing them later in the month, effectively cutting investor rates by a range of amounts - between 4 and 19 basis points and increasing owner occupier rates by between 1 and 11 basis points.
  
• MyState Bank only increased rates by 15 basis points.

Fixed rate home loans

• ANZ increased all fixed options by between 10 and 30bp.
  
• Bank of Queensland withdrew its 1 year fixed rate option completely.
  
• Ubank fixed rates are up by 30 to 55bp.

Current lowest home loan rates

Below are the lowest variable and fixed mortgage rates (P&I, LVR <80%) among lenders we track.

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

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

The above are the lowest rates available in our database for borrowers with an <80% LVR. More competitive rates are available for borrowers with lower loan-to-value ratios.

Thinking about buying a property or refinancing your existing mortgage? Use Mozo’s 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.