Tired of rate hikes? Here are your home loan options

Woman compares home loans on her laptop because she's tired of RBA rate hikes.

After a lovely dry spell, inflation has driven the Reserve Bank of Australia (RBA) to hike rates again – making variable rate home loans more expensive.

Before the November rate hike, the average home loan interest rate for owner-occupiers was 6.61% in the Mozo database. Now that 65 of the lenders we track have announced increases to their rates, the average is now 6.77% – a mere two weeks after the RBA decision. And that’s the average.

There might be more rate hikes on the horizon, too. Every rate rise adds more interest to monthly repayments and piles on the mortgage stress already felt by Aussies. Yet despite the strain, inflation proves dogged.

So what options do home loan borrowers have to avoid rate hikes altogether? Let’s run through the pros and cons.

Fix your home loan interest rate

The most obvious way to avoid RBA rate hikes is to fix your interest rate. Fixed home loans offer one interest rate for a period of time, called a ‘fixed term’ (usually 1-5 years, though some go as high as 7). 

A fixed rate home loan can take the pressure off your budget by guaranteeing consistent mortgage repayments for a while, but before you fix, keep in mind these three crucial cons:

Talk to a financial adviser to see if fixing could be the right solution for you.

Split your home loan interest rate

Want some of the consistency of fixed rates but love the features of a variable rate? A split rate home loan could be the way to go. 

With a split rate, part of your interest is fixed, and part of it is variable. You can choose the proportion of either. For example, 70% of the interest rate could be fixed while the remaining 30% varies with the RBA. 

The main advantage of a split loan is that it’s a partial shield from rate hikes. This could ease some of the uncertainty while giving you the flexibility to enjoy savings when interest rates come down. 

That being said, your split rate won’t drop as much as a pure variable rate, either. This is where a financial adviser – and a mortgage calculator – can help you crunch the numbers.

Look at smaller home loan lenders

Several home loan lenders are trying to innovate ways to deal with the rate hike mortgage crisis. For example, Up Home lets you have up to 50 offset accounts, meaning all your various savers could save you on interest. For refinancers, Unloan comes with an interest rate that drops by 1 basis point every year for up to 30 years over the life of your loan. 

Even smaller players like Northern Inland Credit Union have thrown their hat into the ring with unique features to save. NICU’s Capped Home Loan is a variable rate home loan with a cap of 6.04% p.a. (6.39% p.a. comparison rate*), meaning even when rates rise, they won’t go higher than that maximum or ‘capped’ rate.

All of these loans come with pros and cons, as well as T&Cs, fees, and limits. The point is to do your research, however – there might be more money-saving options than you think.

Refinance your home loan

Refinancing is a classic option for dealing with home loan pain, and many Aussies have taken it up. The value of refinanced home loans hit $18.5 billion in September 2023 – 1.5% higher compared to a year ago, according to the latest lending indicators from the ABS. 

Refinancing can be a stressful process: you essentially have to qualify for a home loan all over, which means tightening up your spending, checking your credit score, and calculating your borrowing power. 

It’s essential to ask yourself some key questions about refinancing, too. What don’t you like about your current lender? Is it just the interest rate, or is it everything? Knowing what isn’t working for you can help you narrow down your home loan comparison search.

Stick with your home loan but find other ways to save interest

If you still like your lender but just need some ways to bring down the cost of your monthly repayments, there are some classic tactics to take. Namely:

  • Call your lender to negotiate.
  • Fill up your offset accounts, if you have them.
  • Make free extra repayments if you can – bonus points if you have a redraw facility.

Interest-saving features exist for a reason, so now’s the time to use them. 

Compare low rate home loans in the table below.

Compare low rate home loans - last updated 23 February 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Home Variable Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.15% p.a. variable
    6.15% p.a.

    Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.

    Compare
    Details
  • Neat Home Loan

    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.11% p.a.

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

    Compare
    Details
  • Mozo Expert Choice Badge
    Home Fixed Rate

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    5.80% p.a.
    fixed 3 years
    6.05% p.a.

    Enjoy the security of a competitive fixed interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply). Mozo Experts Choice award winner.

    Compare
    Details

* 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.