RBA slams market with 0.50% August rate hike. How will lenders respond?

RBA Governor Philip Lowe looking nervous about rate hikes.

Mortgage holders will be bracing for their monthly repayments to push even higher, following the Reserve Bank of Australia’s decision to jack up interest rates by 50 basis points this month. 

This is the fourth consecutive month the RBA has lifted the official cash rate, taking it from near zero — where it remained as the country rode out the worst of the pandemic period — to 1.85 per cent.

The decision comes as inflation rose to 6.1 per cent over the June quarter, as revealed by ABS data released last week. On non-discretionary items price rises were higher at 7.6 per cent.

“The Board places a high priority on the return of inflation to the 2–3 per cent range over time, while keeping the economy on an even keel,” RBA governor Philip Lowe said in his post-meeting statement.

“The increase in interest rates over recent months has been required to bring inflation back to target and to create a more sustainable balance of demand and supply in the Australian economy. The Board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path.”

While inflation is causing headaches in Australia, it’s wreaking even greater havoc in other advanced economies. Data from June showed annual inflation picked up to 8.6 per cent in the Eurozone, 9.1 per cent in the US, and 9.4 per cent in the UK.

Last week, the US Federal Reserve lifted its own policy rate by 75 basis points, with Fed chair Jerome Powell leaving the door open to further large rate hikes if price rises persist.

Any moves by the Fed will loom just as large over the RBA as domestic inflation, given the capital outflow and currency depreciation that would result from diverging monetary policies.

“It's not all about mortgages and savers in Australia. It’s also about how competitive Australia is at attracting foreign money,” said Mozo’s banking expert Peter Marshall.

What does this mean for mortgage holders?

In a recent speech, RBA deputy governor Michele Bullock claimed that the majority of households will be able to handle higher repayments, pointing to the $260 billion in savings that Australians had accumulated over the pandemic period.

But surging interest rates will still test borrowers’ limits. Assuming lenders pass on today’s hike to their customers, the average variable rate in our database will jump to 4.60% p.a. (up from 3.07% p.a. at the start of the year).

Marshall says Australians who bought when property prices were at their highest will be most vulnerable, particularly if they’re not in a position to refinance

“It’s a classic trap of buying late in the cycle, there will be some people who just can’t afford to keep a roof over their heads anymore,” Marshall said.

“That potentially means a lot of rushed property sales, and if that happens when prices are sliding, then the payout is smaller and you’re left with potentially hundreds of thousands of dollars of useless debt.”

Borrowers coming off fixed rate loans will also have to review their budgets, with the RBA estimating that the variable rates they roll over to could see their repayments go up by 40 per cent or more.

For these customers, the key to managing higher repayments won’t be much different than it is for other borrowers.

“If you have an offset account, make good use of it when you can. If you’re paying 4% p.a. on your mortgage, there’s no way you can get a comparable rate on your savings unless you’re looking at a 5-year term deposit,” Marshall said.

“And if you don’t have an offset account, making additional repayments or putting in the legwork and investigating cheaper mortgage options are some of the best things you can do.”

We’ll be keeping track of how banks respond to the RBA’s decision as word comes in. For more information, visit our RBA rate tracker page or our home loan comparison page.

Home Loan Old rate New rate Effective date Rate change Naughty or Nice
4.14 4.64 12 Aug 2022 0.5
ANZ Index Variable Rate (Owner Occupier, Principal & Interest)
5.64 6.14 12 Aug 2022 0.5
Athena Liberate Variable Home Loan (70-80% LVR, Owner Occupier, Principal & Interest)
3.39 3.89 4 Aug 2022 0.5
4.24 4.74 11 Aug 2022 0.5
4.25 4.75 18 Aug 2022 0.5
5.24 5.74 9 Aug 2022 0.5
Bankwest Mortgage Shredder (Owner Occupier, Principal & Interest)
6.0 6.5 12 Aug 2022 0.5
6.03 6.53 12 Aug 2022 0.5
5.7 6.2 16 Aug 2022 0.5
Citi Standard Variable (Owner Occupier, LVR <80%)
6.35 6.85 12 Aug 2022 0.5
5.8 6.3 12 Aug 2022 0.5
4.34 4.84 11 Aug 2022 0.5
4.91 5.41 10 Aug 2022 0.5
5.74 6.24 11 Aug 2022 0.5
3.34 3.84 22 Aug 2022 0.5
5.96 6.46 12 Aug 2022 0.5
3.54 4.04 9 Aug 2022 0.5
loans.com.au Smart Home Loan 90 (Owner Occupier, Principal & Interest)
4.04 4.54 5 Aug 2022 0.5
5.86 6.36 6 Aug 2022 0.5
3.94 4.44 12 Aug 2022 0.5
5.77 6.27 12 Aug 2022 0.5
5.5 6.0 12 Aug 2022 0.5
5.86 6.36 18 Aug 2022 0.5
5.81 6.31 18 Aug 2022 0.5
6.23 6.73 12 Aug 2022 0.5
ubank UHomeLoan - Discount Offer (Owner Occupier, Principal & Interest, LVR 80%-85%)
3.99 4.59 11 Aug 2022 0.5
5.73 6.23 18 Aug 2022 0.5

Read last month's Reserve Bank interest rates update.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 21 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    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. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    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 online in minutes.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    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 online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    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.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    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. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    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.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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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. 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.

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.

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