Half of Aussie home loan customers fear interest rates over 4%

RBA governor Phillip Lowe looks pensively ahead beneath furrowed brow.

Financial fears are brewing ahead of an expected cash rate rise from the RBA tomorrow, which could tip home loan rates above 4% and place almost half (45%) of mortgage holders around the country under significant financial pressure, according to Mozo research.  

This year so far, the RBA has increased the cash rate by 75 basis points – a rise reflected by 71 lenders who have passed on the rate hikes in full to their customers. 

Currently, the average variable rate in Mozo’s database is 3.65%, which is 58 basis points higher than it was in January 2022. On an average $400,000 home loan over 25 years (OO, P&I) the rate rise translates to an extra $1,488 in yearly repayments.

“With interest rates continuing to climb, it’s clear many home loan customers are under increasing financial stress. Significantly higher interest rates coupled with bigger average loan sizes and wider cost of living pressures is a recipe for disaster for household budgets,” says Tom Godfrey, Mozo spokesperson. 

According to Mozo’s calculations, an RBA decision to raise the cash rate by 50 basis points tomorrow would launch the average variable rate up to 4.15%, should lenders pass on the hike in full. The average big four rate may top 4.70%. 

“While there is more pain ahead for home loan customers, taking time to compare rates and seek out a better home loan deal can help to take some of the heat out of your mortgage repayments,” Godfrey says.

What are some of the best variable home loan rates right now?

But it’s not all doom and gloom. When it comes to variable home loan rates in Mozo’s database, there are still 107 home loans starting with the number 2. 

Currently, some of the lowest variable home loan rates in the Mozo database are with customer owned banks, Credit Union SA and P&N Bank. Both sport headline rates of 2.44% p.a. — 176 basis points below the current average big four rate of 4.20%.

Credit Union SA Variable Rate Home Loan Special Offer (Package)
  • Variable rates from 2.44% p.a. (2.88% p.a. comparison rate*)
  • $2,500 cashback (T&Cs apply)
  • $395 yearly service fee
Find out more

Featuring competitive variable interest rates for owner-occupier borrowers starting from just 2.44% (2.88% comparison rate*), the Variable Rate Home Loan Package could be a worthy partner for prospective homeowners. Plus, for eligible customers there is currently a $2,500 cashback offer available! The loan isn't without its fees though. Upfront legal and valuation fees are payable at cost, plus there's a $395 annual service fee and a $350 discharge fee.

P&N Bank & Basic Home Loan
  • Variable rates from 2.44% (2.44% comparison rate*)
  • Flexible payment frequency
  • No service fees
  • $395 discharge fee
Find out more

With competitive variable interest rates for owner-occupier customers that start at 2.44% (2.44% comparison rate*), zero yearly service fee, flexible repayment frequencies (weekly, fortnightly, and monthly), P&N Bank’s & Basic Home Loan could be the loan you’re looking for. Just keep in mind, while there are no yearly service fees, legal and valuation fees are charged at cost, and there is a discharge fee of $395.

Window closes on low fixed rates

“While there are still variable rates hovering around 2%, it’s a different story if you’re looking to fix your loan with the window to lock in a decent rate all but slammed shut,” says Godfrey.

Two of the big four, CBA and NAB, raised their fixed rates in leaps and bounds last week. CBA increased its 1-5 year fixed rates for owner occupiers (paying principal and interest) by 1.40%. NAB raised its 1-year rates by 1.10%, its 2-year rates by 1.0% and its 3, 4 and 5-year rates by 0.80%.

To see how much your repayments might increase under rate hikes of various sizes, visit Mozo’s rate change calculator.