What does a rate rise look like for you?

• Mozo’s analysis shows what an increase in variable home loan rates means to borrowers.
• If the RBA increases the cash rate target by another 50 basis points today, it will hit 1.35%. A jump of 1.25% this year. 
• If lenders pass a 50 basis point increase in full borrowers paying principal and interest on the average new loan amount of $615,310 taken over 25 years, their monthly repayments would increase by $169 from $3,103 to $3,299.   
• On an $800,000 loan the monthly repayments would increase by $219 from $4,070 to $4,289.
• Currently the best variable home loan rates in Mozo’s database are through customer owned banks with Credit Union SA and P&N Bank offering 2.44%.
• Mozo’s database shows the average big four bank rate is 4.20%, 176 basis points above the leading variable rate (2.44%). If the big four banks pass the 50 basis point increase on in-full their average variable rate would top 4.70%

The latest analysis from Mozo has revealed that if lenders pass on another 50 basis point increase to the cash rate in full, the average variable home loan rate would hit 4.15%, with the average big bank variable rate topping 4.70%. 

If lenders passed on a 50 basis point increase to those paying principal and interest on an average $400,000 variable home loan over 25 years, borrowers would need to find an extra $1,320 a year to avoid defaulting on their loan. 

“With economists expecting the cash rate will be increased by another 50 basis points again this afternoon, lenders are once again poised to pass on interest rate pain for home loan customers,” says Tom Godfrey, Mozo spokesperson. 

Mozo’s database shows that if the average variable interest rate passes 4% this month, it will be the first time it has crossed this threshold since July 2019. One month after the RBA cut the cash rate target for the first time since August 2019 and eight months before it made two emergency cuts in March 2020, as it rushed to boost cash flow of businesses and households as the pandemic started to take hold.  

For the average variable home loan rate in Mozo’s database of 3.65%, the monthly repayment for owner-occupiers paying principal and interest on a $400,000 loan over a 25 year period is $2.035. On the same loan amount, a 50 basis points increase could add $110 to your monthly repayments, taking them to $2,145.

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 $2,028 over twelve months.

House prices in the capital cities can be much higher than the average loan amounts, Sydney, Melbourne and Canberra median house values are over $800,000. For borrowers with a larger loan of $800,000 a rate increase of 50 basis points would add an additional $219 to their monthly mortgage repayments, taking them to $4,289.

“Although interest rates look set to rise, there is still time to compare loans and switch. Many of the smaller lenders are still competing hard for your home loan,  moving away from a big four bank to find a more competitive rate could help to reduce any repayment pain coming your way,” says Godfrey. 

Mozo’s database shows the leading variable rate is through customer owned banks with Credit Union SA and P&N Bank offering 2.44%, which is 176 basis points below the current average big four rate (4.20%) and 121 basis points below the average rate (3.65%). If you’re on the leading rate in its database, Mozo found a 50 basis point increase could add $1,224 to your annual repayments.

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If you’re paying the average big four bank variable interest rate, Mozo’s analysis found a 50 basis point increase could add $1,356 to your annual repayments.