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Home loan interest rates: December 2023

Buying a home is one of the most significant investments people can make. Typical mortgage terms last between 20 and 30 years, so there are major costs to consider when comparing options – especially the home loan interest rate. 

Fixed and variable interest rate offers change as the market does, so keeping track of where rates are headed, whether you’re home buying, investing, or refinancing, is essential. For example, in November, the Reserve Bank of Australia bumped up the official cash rate to 4.35%, which will undoubtedly impact a lot of variable home loans on the market.

Here at Mozo, we track over 500 home loans from lenders across Australia, including the Big Four Banks (Commonwealth Bank, Westpac, ANZ, and NAB), challenger banks, customer-owned credit unions, and newer online-only players, to give you a comprehensive view of what’s available. 

And we will continue to monitor what the Reserve Bank of Australia does with the cash rate so you can keep informed about how monetary policy affects the cost of your mortgage repayments. 

Here is what you need to know about home loan interest rates this month. 

What is the current home loan interest rate in Australia? 

  • Current official cash rate: 4.35%
  • Average variable rate home loan: 6.84% p.a. 
  • Average Big 4 Bank variable rate: 7.47% p.a. 

Latest home loan interest rates on Mozo - last updated 9 December 2023

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

    Owner Occupier, Principal & Interest, Refinance Only

    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.

  • Mozo Expert Choice Badge
    Variable Rate Home Loan Special Offer

    Package, Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.51% p.a.

    Package benefits across Home Loans, Visa Credit Card, Personal Loans and Term Deposits. No package fee for the first year. No application, settlement or redraw fees to pay. Quick and easy application. Free CoreLogic RP Data property reports. *Terms, conditions and lending criteria apply.

  • Mortgage Simplifier

    LVR<80%, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.43% p.a.

    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. Winner of Australia’s Best Essential Bank in the Mozo Experts Choice Awards.

  • Home Fixed Rate

    Owner Occupier, Principal & Interest, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    6.40% p.a.
    fixed 4 years
    6.24% 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.

  • Well Balanced Special Offer

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.12% p.a. variable
    6.14% p.a.

    Competitive low rates available for owner occupiers. Free online redraws. 100% offset account for a small fee ($10 p/mth). Quick and easy application online. Get a free evaluation (Valued up to $300). Minimum loan amount $100K.

  • Mozo Expert Choice Badge
    Variable Home Loan 90

    Principal and Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.04% p.a. variable
    6.06% p.a.

    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. Advertised rates include Nov RBA rate increase. T&Cs apply.

  • Simplicity PLUS Special Offer

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.64% p.a. variable
    6.64% p.a.

    Refinance your eligible home loan of $250,000+ and 80% or less LVR and get $2,000 cashback (T&Cs apply) with ANZ’s Simplicity PLUS Home Loan Special Offer. Get discounted rates upfront on eligible loans (T&Cs apply). $0 set up or ongoing fees to pay. Verify your ID and sign documents online for super simple home loan refinancing.

  • Elevate

    Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.20% p.a.

    Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.

  • Well Balanced

    Investor, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.39% p.a. variable
    6.42% p.a.

    Competitive low rates available for investors. Free online redraws. 100% offset account for a small fee ($10 p/mth). Get a free evaluation (Valued up to $300). Fast online application. Minimum loan amount $100K.

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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.

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December interest rates insights

The Reserve Bank of Australia hiked the cash rate to 4.35% in November, and it shows. Variable home loan interest rates have skyrocketed again – some lenders have even passed along rate hikes in excess of 0.30% - 0.45%. Even fixed rate home loans have joined in the scramble. 

While there is still some tightening to come through in December, it won’t be from the RBA. The Big Four Banks – CommBank, Westpac, NAB, and ANZ – agree the RBA won’t lift the cash rate in its 7 December meeting. The most recent CPI has told us inflation is back on the downward slide. Let’s hope it stays that way over Christmas. 

The RBA doesn’t meet in January, so fallout from November will likely continue into the New Year. The next meeting to look forward to is February 2024; according to economists, this one remains live. If spending climbs too high over Christmas, we could get another rate hike in 2024. For now, however, 4.35% seems as high as the cash rate will go in 2023. 

Of course, when interest rates will come down is another matter entirely.

Average home loan rates in December 2023

At the time of writing, the average rates for a $400,000 loan (OO, P&I, LVR >80%) among lenders we track are:

  • Variable rate: 6.82% p.a. 

  • Big 4 variable rate: 7.47% p.a.  

  • 1-year fixed rate: 6.53% p.a. 

  • 2-year fixed rate: 6.46% p.a. 

  • 3-year fixed rate: 6.44% p.a. 

  • 4-year fixed rate: 6.69% p.a. 

  • 5-year fixed rate: 6.70% p.a. 

More home loan resources

Head to our home loans comparison hub to compare all home loans in the Mozo database.

Want the best offers around? Check out award-winning and expert mortgage picks at our best home loans hub. 

Stay updated with the Reserve Bank’s latest movements through our RBA rate tracker page. 

To find out how interest rates are tracking in other banking products for December, check out our snapshots for Personal Loan Interest Rates, Car Loan Interest Rates, Savings Account Interest Rates and Term Deposit Interest Rates.

What is a home loan interest rate?

When you take out a home loan, your lender typically gives you what is known as the principal loan amount and your home loan interest rate is the annual cost for borrowing this principal. This is expressed as a percentage, known as the Annualised Percentage Rate (APR), which represents the annual cost to borrow a sum of money.

Of course, your interest rate can vary because it’s set by your specific lender and the type of home loan you choose. 

Home loan interest example 

To illustrate how home loan interest is calculated, say you want to borrow $600,000 to purchase a home. Your lender agrees to lend you the money and charges an interest rate of 5% p.a. The amount of interest paid in this scenario is determined using the following formula:

(principal x interest rate) ÷ time = interest

So if we multiply $600,000 by 0.05, then divide it by 365 (the number of days in a year), we would get $82.19. This is the amount of interest you would be charged in a day. 

However the amount of interest you will be charged changes as you chip away at your principal amount over the course of your loan. You can work out how much you would pay over the life of a loan with our home loan repayments calculator.

How are home loan rates determined?

The Reserve Bank of Australia (RBA) is our central bank, setting monetary policy and importantly, for mortgagees, the nation’s official interest rate. This figure is based on things like inflation, employment, and levels of spending and investment. So it is subject to change on an ongoing basis and as we have seen over the course of 2022 and ‘23, the official rate can change quite a bit!

Banks and lenders then set their own home loan interest rates based on the RBA’s decision each month, while also taking into account their business costs. So no two banks set their home loan rates the same way, which is why it’s a good idea to shop around and compare home loans

Types of home loan interest rates

The type of interest rate you pay on your home loan can affect how much you pay overall and each month. There are pros and cons to each type, so it’s important to take the time to find out which will suit you best. Your options include:

  • Fixed rate

A fixed home loan interest rate locks in your repayment amount at a certain value and will remain the same for a set time, usually up to 5 years. This makes budgeting easier, as you’ll have a set amount that you need to pay each month that won’t be affected by rate increases. 

The downside, however, is that if rates decrease while you’re on fixed term interest, you won’t reap any of the benefits. When your fixed term ends, you have the option to either enter into a new fixed rate or switch to variable rates.
In general, fixed interest rate loans are less flexible than other types of mortgage rates, and you could end up paying penalties if you repay the loan early.

  • Variable rate

A variable home loan interest rate means that your repayments might change at any time, based on changes to the cash rate or the whims of your bank. There’s less security in this type of interest rate - your repayments are subject to rises and falls in the market. 

However, it’s a popular type of home loan in Australia, as variable rates often sit lower than fixed rates. A variable interest rate might suit you if you're looking for flexibility, as you’ll have the option to make extra repayments and pay off your loan quicker.

  • Comparison rate

It can be hard to compare home loan rates sometimes. Aside from the interest rate, there might be extra fees and charges built into your home loan, which means the lowest headline interest rate might not always the best option. That’s where the comparison rate comes in.

The National Credit Code requires that lenders show comparison rates - which factor in interest, fees and charges - to give you a clearer idea of the true cost of a loan. So when you compare home loan interest rates on Mozo, you’ll see an interest rate plus a comparison rate for each product.

What is a comparison rate?

Keep in mind that comparison rates are a guide based on a secured loan of $150,000 over 25 years, with monthly principal and interest repayments. Different values or time frames on loans will mean different comparison rates. So while the comparison rates on our site are useful for choosing the best value home loan, to find out exactly how much interest you’ll be paying you'll need to check with your lender.

How are my home loan interest repayments calculated?

How much you pay each month will depend on numerous factors, including what type of rate you’re paying, how often your interest is calculated and how long your home loan term is for. One of the important factors in determining how your interest rates are calculated is whether your home loan is an interest only or principal and interest loan. Here’s the difference:

  • Interest only loans

With an interest only loan your monthly repayment consists of only the interest for the loan, and not the loan amount itself. The monthly savings can be significant if you’re not paying any of the principal loan amount, which might be a great short term solution if you’re running on a tight budget. The downside is that you won’t be making any progress toward actually owning your home.

Interest only loans are popular for investors, because they’re often counting on the value of the home increasing enough to sell the property, pay off the loan and make a profit.

Remember that you will eventually have to pay off the total loan amount, so while an interest only loan might be affordable in the short term, you should have a long term repayment plan in place.

  • Principal and interest loans

With a principal and interest loan, you’re paying interest, plus a part of the total loan amount each month. At the beginning of the loan, most of your repayment will go toward paying interest and a little will go toward the loan amount. As the principal amount gets lower, so does the interest you need to pay on it, so eventually, most of your monthly repayment will be going towards the principal, while a little goes to interest.

While you’ll be paying more each month than you would with an interest only loan, the good news is that by the end of your loan term, you’ll own your home entirely.
You can use Mozo’s home loan repayments calculator to see not only how much your monthly repayments would be with either an interest only or principal and interest home loan, but also how much total interest you would pay with each one.

How does the home loan interest rate affect my current home loan?

The interest rate charged on your home loan impacts the amount you’ll repay over the term of your mortgage. So while you might take on a home loan at one rate and be comfortable with your repayments, a fluctuation in the interest rate could see you paying more or less. This is why those with a variable rate home loan need to monitor the official rate set by the Reserve Bank, which influences how lenders set their home loan rates.  

What is causing the home loan interest rates to increase?

Home loan interest rates are currently increasing due to the “cost of living” crisis that is playing out in the global economy. The RBA has been raising the official cash rate in a move to get inflation down. When the RBA raises the cash rate rate, bank’s funding costs are higher and they generally then pass some of these costs onto their customers.   

It’s worth noting that lenders aren’t obligated to change the interest rate on products when the cash rate moves. 

What should I do if interest rates get too high and I can’t make my repayments?

With mortgage interest rates jumping significantly in recent times, repaying a home loan has become more challenging. So if you're struggling with your home loan repayments, it’s important to know that all is not lost and that there is help available. It’s a good idea to address the issue early so that you have more options. Track your money, understand where you stand and don’t ignore default notices. Start by talking to your lender about your options and if you feel you need extra advice, a financial or legal advisor can also help.

Picture of Peter Marshall
Peter Marshall
Financial Services Specialist

Peter Marshall has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.

FAQs about home loan interest rates

Got more questions about home loans? We’ve got answers. Below, we run through some key bits of info to help you understand home loan interest rates, and put you on the right track to find a home loan that suits you.

Is the mortgage rate and home loan rate the same thing?

Yes, these terms usually refer to the same percentage rate charged on a home loan by a lender. ‘Home loan rate’ is typically more common in Australia. 

What is the comparison rate?

The comparison rate is designed to give you an accurate picture of how much each home loan might cost you by taking into account fees and any other extra charges, so don’t forget to use it.

Who sets home loan rates?

As mentioned above, the cash rate serves as a benchmark for mortgage rates, but where mortgage rates sit is ultimately up to individual lenders. This is why commercial interest rates are so much higher than the cash rate: lenders need to be able to cover their operating costs (staff, branches, marketing, interest paid out to customers, etc.) and make a profit at the same time.

Lenders will also charge different rates depending on the borrower and the type of loan. For example, interest rates are typically higher on investment loans than on owner occupier loans, as they are considered riskier. The same goes for interest only loans.

What is the fixed rate cliff? 

The fixed rate mortgage cliff describes when people on fixed interest home loans come to the end of the period when their rate is fixed, and therefore get hit by an unusually high jump in repayments. Many Aussies with fixed home loans have found themselves in this scenario over the past year. One of the main reasons for this is that a large number of people bought property or refinanced to a fixed rate during the lower interest rate environment of the covid pandemic.

How often do home loan rates change? 

That depends. The RBA might decide to raise or lower the cash rate, prompting many lenders to make adjustments to their home loan rates. But lenders are known to make out-of-cycle decisions too, meaning they can increase or decrease rates at their own discretion, simply in response to business demands.

How will home loan rate changes affect my mortgage repayments?

As everyone with a variable rate home loan knows, if your lender decides to raise rates, your repayments will also go up. The opposite will be true if your lender decreases rates. Even a small change in interest rates can make a big difference in the amount you pay each month. For an idea, use our rate change calculator

Does my bank need to tell me if they are changing my home loan rate?

If a bank or lender decides to raise or lower their mortgage rates, it will likely notify customers and inform them of any changes to their repayments. Customers who have arranged to pay just the minimum payment amount via direct debit should have their repayments automatically adjusted.

What additional home loan features are there?

You have to weigh up the benefits and disadvantages to having extra features on your home loan. While some extras like an offset account, free extra repayments and repayment flexibility can save you money, others may not be so helpful and you generally pay a higher premium for a full features home loan. Take a careful look at the features being offered and decide if they are worth the extra cost. If you’re not sure exactly which feature might benefit you, check out Mozo’s guide to home loan features in a nutshell.

When is the interest calculated on my home loan?

Your interest might be calculated daily, monthly, quarterly or annually. Daily interest is best because it’s calculated as your principal loan reduces, and so you’ll pay less interest all up.  Annual interest, on the other hand, is calculated each day, but based on a yearly principal, which means it takes a whole year before you’ll pay less interest. If you’re on anything other than daily interest, try to time your monthly repayments to be before your interest is calculated, so you’ll be paying interest on the lowest principal possible.

Are home loan rates negotiable?

Banks don’t necessarily advertise the fact, but it is possible to negotiate a cheaper home loan rate. Success rates will vary depending on the specifics of the loan, but it’s always worth approaching your lender to see if they’ll budge. 

How can I reduce the amount of home loan interest I pay?

The main goal for your home loan should be to pay as little interest as possible while remaining realistic about what monthly repayments you can afford to make. Here are a few tips and tricks to help you reduce the amount of interest you pay on your home loan:

  • Pay off your loan as quickly as possible. The quicker you can get rid of your loan, the less interest you will pay. But be careful, as sometimes, particularly with fixed term interest rates, you may be charged extra fees or penalties for paying off your loan before the complete term is finished.
  • Switch to a shorter term. If your lender allows it, you may want to look at a shorter loan term. This would mean you’ll pay more each month, so be sure to check your budget before going ahead, but it will save you money overall. So, say you had a loan of $150,000, at an interest rate of 3.98%. On a 25 year term, you’d pay $790 each month and a total of $87,030 in fees and interest. If you reduced that to a 20 year term, your monthly payments would increase to $907, but all up, you’d only pay $67,774.
  • Take advantage of free extra repayments. Again, you’ll need to check that there are no fees or penalties for overpaying, but this can be an effective way to quickly reduce your principal, and therefore pay less interest. If you’re budget allows for it, you can pay extra in lump sums or added to your monthly repayments to pay off your loan faster.
  • Use an offset account. An offset account is a bank account attached to your home loan. The balance you keep in this account is offset against the principal of your home loan to help you reduce the amount of interest you will pay. For example, if you had a home loan of $400,000 and $20,000 in your offset account, you’d only be paying interest on $380,000 of your loan. Think about getting your salary put into your offset account to get the most out of this feature.

How do I find the best home loan interest rate?

There are heaps of competitive home loan interest rates available and it’s worth the time to do some research and find a rate that suits your budget and lifestyle. To get you started, check out these great tools at Mozo:

  • Home loans comparison page - find out what home loan rates are currently on offer from hundreds of Australian financial institutes, from the big banks down to small online lenders and credit unions.
  • Home loans calculators - crunch the numbers on your home loan and find the answer to questions like ‘How will rate changes affect my repayments?’ and ‘How much can I afford to borrow?’
  • Home loan guides - we’ve got a guide on all the trickiest parts of home loans to help you through the process, all the way from deposits to refinancing.

You can also start your search for a great home loan interest rate by checking out some of the award winning home loans and Mozo editor’s picks on our Best Home Loans page.