Three quarters of borrowers have been preparing for higher home loans

woman picking up a green block for banks rba hikes

With the Reserve Bank of Australia’s (RBA) interest rate hike looming this month–and several more times expected through the year—a large number of borrowers are taking steps to build up their saving buffers.  

Recent research by Mozo has found that 76% of borrowers have been preparing for the inevitable interest rate hikes. About 29% of borrowers are stashing extra money into their savings, 24% are putting spare change into offset accounts, and 11% have been cutting their discretionary spending.

“There’s no doubt that many home loan customers will be sweating on another rate rise today, but the good news is many people have been preparing their finances by setting up offset accounts, building up their savings or cutting back on spending,” says Mozo spokesperson Tom Godfrey.

This comes as no surprise since a home loan interest rate hike comes with higher mortgage repayments. 

Our research has shown that if the cash rate goes up by 40 basis points (0.40%), then homeowners playing off a $750,000 home loan over 25 years will see an extra $160 added to their monthly repayments. 

While $160 might not look like much, that’s an extra $1,920 a year. That’s the cost of about three months' worth of groceries, two months of car repayments, or a month’s worth of childcare costs. It’s quite a bit of money that you’ll no longer have access to annually. 

If you haven’t prepared for the rate hike, below are some tips on below are some tips for safeguarding your finances.

Tips on handling an interest rate increase

The RBA cash rate increase doesn’t have to be scary. Quite frankly, it's part of the natural economic cycle of a country. And it's not like there is nothing you can do to deal with it. 

Here are three tips to consider when preparing for the interest rate hike.

  • Stress test your capability to make higher mortgage repayments. You can use Mozo’s repayment calculator to determine how much your monthly payments will be as the rate increases. 
  • Get an offset account. Look for home loans that offer offset accounts. You could reduce your interest rate payments by putting your salary into an offset account. 
  • Find a better deal by comparing rates. Consider negotiating for a better deal with your current lender or switching. Being with a lender doesn’t have to be like a marriage.

“Even with home loan rates steadily increasing, it pays to compare and make sure you’re getting the best deal possible,” says Godfrey.

Check out Mozo's home loan refinance page to learn more about switching your home loan. Alternatively, go to our rate change tracker for more information on interest rate changes.

Home loan comparisons on Mozo - last updated 6 July 2022

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    Initial monthly repayment
    2.60% p.a.variable for 24 months and then 3.00% p.a. variable
    2.96% p.a.

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    Initial monthly repayment
    2.64% p.a. variable
    2.56% p.a.

    For refinancers only. 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 in as little as 10 minutes.

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    Variable Rate Home Loan

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    2.59% p.a. variable
    2.49% p.a.

    $5000 refinance cashback. Owner-occupier refinancers only living in NSW/VIC/SA metro and inner regional areas. Receive up to an additional 0.15% off your rate as you pay off the loan. Receive bonus payments up to $2,500. T&Cs apply. Mozo Experts Choice Award winner for 2022^.

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  • Variable Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

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    Initial monthly repayment
    2.64% p.a. variable
    2.66% p.a.

    Purchase and Refinance. Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application.

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  • Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

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    Initial monthly repayment
    2.84% p.a. variable
    2.84% p.a.

    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. Apply online in as little as 15 minutes.

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  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.64% p.a. variable
    2.64% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

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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, loan amount and term entered. 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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