Property plummets as home loan costs rise: will the RBA hike the cash rate in September 2022?

Collage of people stacking blue blocks.

What used to be a shock now comes as routine. After three massive 0.50% rate hikes in a row, property prices have plummeted and home loan holders are feeling the squeeze.

Has the Reserve Bank of Australia gone far enough in their efforts to curb inflation – or is there more still to come?

Let’s break down the predictions for September’s RBA decision.

What’s the likelihood of a September interest rate hike?

Collage of a girl stacking blue boxes.

Unfortunately, pretty high. Headline inflation hasn’t cooled to within the RBA’s target band of 2-3%, and until that happens, the central bank will likely continue to raise the official cash rate.

“I don’t think there’s any chance they won’t move,” says Mozo banking expert Peter Marshall. “The only question is will it be 0.25% or 0.50%.”

How high will interest rates go this time?

Collage of a girl looking ahead a rising blue bars.

All four Big Banks predict a 0.50% September hike, which would be the fourth major rate hike in a row. This would lift the cash rate into ‘neutral’ monetary territory at 2.35%. The big banks have forecasted a long-term cash rate peak of 3.35% by February 2023. 

However, many experts agree there’s room for a gentler rise after the September meeting, with October following at a more moderate 0.25%. There’s also a possibility the RBA will only move by 0.25% in September since the housing downturn has been worse than expected.

RELATED: Property prices have fallen, so is now a good time to buy in?

“Part of the debate at the moment is around whether the RBA’s neutral cash rate target is actually neutral or quite contractionary, given the way the world economy is at the moment,” explains Marshall. 

“I think most economists are now thinking we’re already seeing contraction, so pushing rates higher is just going to amplify that effect.”

While the RBA has consistently maintained the vast majority of households are in a good position to handle the hikes, the stress reported by consumers from the rising cost of living might suggest otherwise. 

Given its desire to stamp out inflation, however, we’re likely to see another 0.50% from the RBA tomorrow – and further ripples in the housing market.

Loan details

Rate change

Repayment change if rates go up

Any chance of no rate hike, or a rate cut?

Collage of a girl standing on a blue line's edge while clutching a blue block.

Despite a record low unemployment rate, wages still haven’t nearly increased enough. So while the RBA probably will lift the cash rate in September, there’s a strong argument to be made for a more dovish approach.

According to the Australian Bureau of Statistics, there’s been a 3.5% gap between the growth rate of prices and salaries in the past year – a small number revealing a wide chasm. If people don’t earn enough to handle rising interest rates, then another dramatic hike could put the economy into a recession – which would justify a rate cut.

“The RBA has a long history of being terribly optimistic,” says Marshall.

“There are charts showing what the RBA has forecast for wage growth versus actual wage growth, and it has always overshot. So whatever it’s doing doesn’t seem to give it a terribly accurate read.”

Besides, borrowers aren’t the only ones affected by hikes: landlords have been passing along the costs to tenants, too, contributing to a 10% rise in rent over the last year.

If the RBA continues to only use mortgage payments and lagging salary indicators as bellwethers for economic health, it may miss a crucial part of the picture.

How will banks respond to a September RBA cash rate hike?

Collage of two people climbing an ascending row of blue bars.

So far, 98% of lenders in the Mozo database have increased their home loan interest rates in response to the RBA’s August decision. Of those who made changes:

  • 75% passed along the full rate hike.
  • 22% passed along a partial or no hike.
  • 2% opted for a hike bigger than the RBA. 
  • 2% have yet to announce changes.

Since the RBA began increasing interest rates back in May, 61.5% of lenders tracked by Mozo have passed along the full rate hike every time. Among these lenders are the big four and most major competitors.

If the RBA moves again in September, this means the majority of borrowers can likely expect another hit to their variable rate mortgage, unless they fix or refinance.

What will another rate rise mean for home loan borrowers?

Collage of a woman smiling on top of a blue bar.

Borrowers have been taking the brunt of the RBA’s efforts, so another 0.50% rate means higher monthly repayments. Those with an offset account and free extra repayments with a redraw facility should make the most of those features now, as both features can help you save on interest.

Term deposits and savings accounts have also seen some beneficial increases in response to the RBA. If you’re thinking of finding a better way to park your money, compare savings rates to see if there’s a better deal out there. 

RELATED: Why understanding monetary policy can help you save money

We’re getting to the thorny end of the RBA’s tightening cycle now. Proactive steps today could make all the difference tomorrow.

Stay on top of rate movements with Mozo’s new interest rate tracker. You can also see how rate changes affect your mortgage repayments with our rate change calculator.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 22 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.