2023 RBA interest rate tracker: What do rate hikes mean for your home loan?
Australians might have gotten accustomed to low interest rates during the pandemic, but that changed after the Reserve Bank of Australia started tightening monetary policy last year.
Prior to that, the last time the cash rate went up was in November 2010, so a shifting interest rate environment has taken some getting used to — particularly among the 1.1 million borrowers who hadn't experienced a cash rate above 0.1%.
The graphs below provide a historical overview of the Aussie mortgage market and details on how lenders have moved their home loan interest rates in response to the RBA.
Reserve Bank of Australia cash rate
Interest rates are the main tool central banks have at their disposal for steering the economy in a desired direction. Central banks around the world have been lifting interest rates in response to sky-high inflation, and the RBA is no exception.
Over the past two years, the RBA has lifted the cash rate by 425 basis points.
Variable rate home loans
Variable rate home loans are sensitive to RBA interest rate movements. They will usually be priced a few percentage points higher than the RBA’s target because lenders factor in operating costs. If the cash rate goes up, variable rates will too.
The graph below shows the relationship between the cash rate and variable rates for various home loan borrower types.
Average variable rates
5.59%
Lowest variable interest rate in the Mozo database.
6.83%
Average variable home loan rate for owner occupiers - December 2023.
$2,784
Initial monthly repayment on a $400,000 loan over 25 years - December 2023.
Fixed rate home loans
Fixed rate home loans are predictive of RBA interest rate movements. Since fixed rates stay the same for their fixed term, lenders set rates based on what they think the RBA will do during that period. If they expect interest rates to rise, so will fixed rates, and vice versa.
The graph below shows the average fixed rates for 1-5 year home loan terms. You can see how they have followed a similar path to the RBA cash rate.
Average fixed rates
6.54%
Average fixed 1 year home loan rate for owner occupiers - December 2023.
6.44%
Average fixed 3 year home loan rate for owner occupiers - December 2023.
6.65%
Average fixed 5 year home loan rate for owner occupiers - December 2023.
How high will interest rates go?
The RBA rate hike cycle has come a long way. At the moment, the cash rate is in restrictive territory, meaning it’s high enough to contract the economy and slow down inflation. This means we’re likely near or at the cash rate peak.
Australia’s Big Four Banks – Commonwealth Bank, Westpac, NAB, and ANZ – have each given guesses on how high interest rates will go. Here is a breakdown of big bank predictions.
| Bank | Rate Peak |
| CBA | 4.35% |
| ANZ | 4.35% |
| Westpac | 4.35% |
| NAB | 4.60% |
Average new loan repayments across Australia
Home loan rate change calculator
A variable rate home loan can offer freedom and flexibility, but it can also leave you vulnerable to rising interest rates. Can your budget handle a higher monthly home loan repayment if rates rise again?
Find out with our rate change calculator.
Loan details
Repayment change if rates go up
Top variable home loan rates - December 2023
There are a number of reasons why someone might pick one home loan over another, but if pricing is a main concern, we’ve compiled some of the lowest variable rates from lenders we track below.
Advertiser disclosure
Homeloans360 - Owner Variable Home Loan (Plus, Owner Occupier, Principal & Interest, LVR<80%)
5.59% p.a. (5.59% p.a. comparison rate*) variable rate
Country to Coast Variable Rate Offset Home Loan (Owner Occupied, Principal and Interest)
5.69% p.a. (5.70% p.a. comparison rate*) variable rate
The Mutual Bank - Special Budget Home Loan (Owner Occupier, LVR <80%)
5.69% p.a. (5.70% p.a. comparison rate*) variable rate
Unloan - Unloan Variable (Owner Occupier, Refinance Only, LVR <80%)
5.74% p.a. (5.65% p.a. comparison rate*) variable rate
Illawarra Credit Union - Bare Essentials Special Offer (Owner Occupier, Principal & Interest)
5.79% p.a. (5.89% p.a. comparison rate*) variable rate
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Frequently Asked Questions
What is the RBA cash rate?
The cash rate (also called official interest rates or the policy rate), is the interest rate on 'overnight funds.' These are the funds that banks lend to one another to cover the transactions they have to make on a daily basis.
When the Reserve Bank of Australia moves the cash rate up or down, it tends to shift the economic mood in ways that are believed to affect spending, investment, inflation and employment.
How does the cash rate affect home loan rates?
The cash rate directly affects variable home loan rates, so unless you’ve fixed your mortgage, you can expect your interest rate to increase by roughly the same amount. But the cash rate is one of several things banks have to take into account when pricing their loans. While it serves as a baseline, rates will differ across lenders depending on their business needs (think the cost of staff, branches, marketing, and interest paid out to customers).
When does the RBA announce its decision?
The RBA meets on the first Tuesday of every month (except January). It announces any changes to the cash rate at 2:30 the same day. From 2024, however, the RBA will only meet 8 times a year instead of 11. The Tuesday announcement time will remain the same.
How does the cash rate affect the economy?
Households and companies borrow money to spend, so if the cost of borrowing is high, we can expect them to dial down their spending. This impacts business profits, hiring and investment decisions, employment, wages and ultimately inflation.
Will higher interest rates cause property prices to fall?
Higher interest rates have a dampening effect on property prices. This is because the higher cost of borrowing tends to discourage hopeful buyers, particularly first home buyers, from entering the market.
What's are the RBA inflation and employment targets?
The RBA has an inflation target of between 2% and 3%. The RBA typically also places a high priority on achieving full employment, which is when the jobless rate is around 4%.
*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. Information accurate as at latest published date.*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.
Information accurate as at latest published date.