Pre-pandemic rates: Average home loan rate surpasses pre-pandemic levels

Average variable home loan rate has passed 4%, which was last seen before Covid

29 July 2022

  • The average variable interest rate is 4.05%, which was last seen in July 2019
  • Big four average variable rate is 4.68%, which was last seen in February 2018
  • Speculation that the RBA could lift rates by 25 bp, 50bp or 75bp next Tuesday
  • If lenders pass on 50 basis points next week, principal and interest mortgage holders with a $400,000 loan will see a yearly increase of $1,356
  • If the RBA increases by 75 basis points, on the same $400,000 loan, homeowners would face a more than double the increase, $3,444 per year
  • Currently the best variable home loan rate in Mozo’s database is 2.54% from Homeloans360, 151 basis points below the average variable rate

After three consecutive rate increases, the average home loan has surpassed pre-pandemic levels and now sits at 4.05%, which was last seen in July 2019. With another interest rate increase on the horizon next week, borrowers need to prepare for mortgage payments to increase yet again.

“While most households can shuffle their budgets to accommodate a rate increase of a couple hundred dollars, the frequency of the rate hikes is becoming relentless. Households are now facing their fourth rate increase, with more on the way,”  says Claire Frawley, Mozo Personal Finance Expert.

Owner-occupiers paying principal and interest on a $400,000 loan, with the average variable interest rate of 4.05% are currently  making monthly repayments of  $2,122 On the same loan amount, another 50 basis points increase could add $113 to monthly repayments, seeing their yearly mortgage payments increase by further $1,356.

“With rates already back to pre-pandemic levels, the last time the average interest rate was sitting around 4% was after the RBA had just increased the cash rate in June 2019, after holding it at 1.50% for 30 months.”

The latest analysis from Mozo has revealed that if lenders pass on another 50 basis point increase to the cash rate in full in August, the average variable home loan rate would hit 4.55%, with the average big bank variable rate topping 5.18%.

National Average New Loan Amount 

For those with the national average new loan amount for owner occupiers, $615,310, a rate increase of 50 basis points would increase their mortgage repayments to $2,076 each year.

Sydney, Melbourne & Canberra Median House Value Loan Estimate

The  median house values in Sydney, Melbourne and Canberra are over $800,000. For borrowers with a larger loan of $800,000 a rate increase of 50 basis points would add an additional $224 to their monthly mortgage repayments, taking them to $4,469.

“Earlier in the month, economists were predicting that the RBA could increase the cash rate by 75 basis points in August, to be the biggest rate rise to date. However, their speculation was based on CPI growing to 6.3% annually in June, and it fell short, only growing to 6.1%. 

Average Big Four Bank Variable Interest Rate 

Customers who hold a mortgage with one of the big four banks could be facing a yearly increase of $1,392 if the RBA increases the cash rate by 50 basis points and the big banks continue to pass on the rate increase in full.

Lowest Interest Rate in Mozo database

Mozo’s database shows the leading variable rate is 2.54%  with Homeloan360, which is 214 basis points below the big four average variable rate (4.68%) and 151 below the average variable interest rate (4.05%). For mortgage holders on the leading rate, Mozo found a 50 basis point increase could add $1,224 to their yearly mortgage costs.

“Many smaller lenders are still trying to attract new customers with competitive interest rates. So although interest rates are set to rise, there is still time to compare and switch home loans,” says Frawley.