Handling RBA rate talk: are interest rate increases something to worry about?

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It’s easy to get caught up in the moment. Rate hikes from the Reserve Bank of Australia have dominated home loan news for the last year, with much of the chatter hingeing on how this will impact variable interest home loans – and by extension, mortgage repayments

But while many Australians have good reason to be concerned about their mortgages, let’s keep things in perspective. Housing market fluctuations happen all the time, and the RBA isn't done raising rates yet

So while we may be in an uncertain moment, zooming out on the Australian property market will tell us how to handle the rate hike news – and plan for the future.

Our current housing market moment

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Honing in on a specific week in the housing market is like mistaking a single puzzle piece for the bigger picture. Cash rate hikes, as far as a tool of monetary policy goes, are quite a slow lever to stop inflation. It takes quite a few successive rounds of rate hikes to ripple across variable interest rates, from home loans to savings accounts, let alone cool down the economy.

In fact, we may only be just now experiencing the full effects from the rate hikes in 2022.

These effects can include:

  • Higher variable interest rates for home loans, savings accounts, and term deposits.
  • Costlier home loan repayments, especially for variable home loans.
  • Higher insurance premiums on mortgage protection policies.
  • Lower property prices, since expensive home loans put off many potential buyers and drag down property values.
  • Diminished home equity, which often follows property value drops. This can also make unlucky buyers prisoners of their own mortgage, as they don't have enough equity built up to safely refinance.
  • Constrained housing affordability, since higher interest loans price many Australians out of home-ownership while putting others under mortgage stress.
  • A rising cost of living, since housing costs contribute significantly to the Consumer Price Index (CPI).
  • Increased risk of a recession, since if the RBA overdoes it in their gamble to stop inflation, they must stop the economy too much. 

Variable rate home loan trends in Australia:

Those hoping to avoid the variable rate hike by fixing their home loans may find themselves disappointed, since fixed rates have largely had rate expectations priced into them as this point.

Fixed rate home loan trends in Australia:

Loan details

Rate change

Repayment change if rates go up

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Downturns are nothing new to the property market. Besides, there’s much more to consider besides rising interest rates when reading the housing crystal ball. If you look over the last thirty years of housing trends (the common life of a home loan), you’ll notice a few perspective-changing things. 

Firstly, housing prices will inevitably go up over time. Australian housing values have increased by nearly 415% since 1991, although they did experience their fastest rate of growth during the 2021 housing boom. So despite COVID, the GFC, and countless other global conflicts over that same time period, housing prices still escalated. For those looking ahead, this is critical to keep in mind.

Secondly, every boom is followed by a bust. Socioeconomic conditions create an ebb and flow in everything from property value to where popular demand lives. Higher demand will push up prices, then demand drops after the prices get too high, and so forth.

It can be both a comfort and an inconvenience to know things will never stay the same, but this also encourages caution to those leaping into a red-hot market. Your equity may diminish when prices fall, or you may have to budget for a hefty capital gains tax.

Even coastal erosion has jeopardised nearly $25 billion worth of beachfront property, which was one of the most popular areas to buy in the 2021 property boom.

Thirdly, the cost of housing finance greatly impacts the property market. Raising the cash rate escalates interest rates on home loans, which knocks on to how much buyers are willing to bid on the house of their dreams. Struggling sellers will have to compromise, thus lowering the final price. 

Inflation, the primary target of the RBA's rate hikes, clocked in at an eye-watering 7.8% over 2022, which means the market will require more intervention until conditions normalise. While property prices still haven't dropped below their pre-boom norms, buyers may have a window as conditions continue to change in 2023. 

While it’s part of the deal that you may save now to pay more later with a variable home loan, it’s important to stress test your mortgage because rates will always change. Budgeting for inevitable shifts instead of panicking about what’s happening now will put you in better stead with your mortgage repayments long-term, and may be key to breaking – and staying – in.

Keep a finger on the housing market’s pulse with our home loan interest rate comparison tool, or stay on top of rate increase news with our RBA rate tracker

Compare a selection of low interest home loan offers below.

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 472 home loans.
Last updated 25 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.

  • Discount Great Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    • over $150k
    Interest rate
    6.19 % p.a.
    Variable
    Comparison rate
    6.21 % p.a.
    Initial monthly repayment
    $3,059
    Go to site

    An easy to use Home Loan with no establishment fee and no monthly or annual fees. Minimum deposit of 20% is required. Mozo Experts Choice Awards - Investor Home Loan Award 2024^.

  • 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.

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* 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

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