What it means and what you can do about it
If your mortgage repayment has gone up recently, you’ve probably noticed the impact on your household budget.
The Reserve Bank of Australia (RBA) has increased the cash rate multiple times this year. When that happens, most banks and lenders pass those increases on to borrowers by raising home loan interest rates. For families already juggling expenses like groceries and school costs, that can start to feel like a lot.
So what’s actually going on, and what can you do about it?
Why are interest rates going up?
In simple terms, the RBA uses interest rate rises to help control inflation.
By increasing the cash rate, the goal is to slow spending across the economy and bring inflation back down over time.
How does this affect your household?
If you’re on a variable home loan, your lender may have already passed on some or all of those rate rises.
Even a small increase can make a noticeable difference. For example, a 0.75% rise on a $600,000 loan could mean paying around $284 more per month*. Over a year, that adds up.
For many families, that extra cost is being absorbed alongside already rising expenses, which can put real pressure on the household budget.
What can you do?
The good news is there are a few practical steps you can take to manage the impact.
1. Review your current rate
A lot of people assume they’re already on a competitive rate, but that’s not always the case.
Take a few minutes to look at what you’re currently paying and compare it to what’s available in the market. You can use comparison websites or speak with a mortgage broker to get a clearer picture.
2. Ask your lender for a better deal
This is one of the simplest and most effective steps, and it’s often overlooked.
Call your lender and ask if they can offer you a lower interest rate. It helps to have a couple of competitor rates on hand so you can show you’ve done your research.
If you’re not quite sure what to say or how to approach the conversation, having a simple plan can make it feel much easier. Even a short call can lead to meaningful savings.
If they don’t offer a discount, or it’s not enough, you can then decide whether it’s worth exploring a refinance.
3. Consider fixing part or all of your loan
Fixing your interest rate can give you some certainty around your repayments, which can make budgeting easier.
Fixed rates are usually set for one to five years. During that time, your repayments won’t change, even if rates increase again.
The trade-off is flexibility. If rates were to drop, you wouldn’t benefit during the fixed period, and it can be more complicated to make changes to the loan.
Another option is to split your loan, with part fixed and part variable. This can give you a balance between certainty and flexibility.
4. Stay on top of your loan if your fixed rate is ending
If you’re currently on a fixed rate, it’s important to know when that term is due to end.
Once it expires, your loan will usually roll onto your lender’s standard variable rate, which may be higher than expected given recent rate rises.
When that notification comes through, it’s worth taking the time to review your options rather than letting it roll over. Comparing rates and having a quick conversation with your lender can make a noticeable difference.
If needed, refinancing to a different lender may put you in a better position.
5. If you’re looking to buy, plan for higher rates
Rate rises don’t just affect existing homeowners. They also impact buyers.
Higher interest rates can reduce your borrowing capacity, sometimes quite significantly, and increase the cost of repayments.
The key here is preparation. Different lenders can offer different borrowing amounts and interest rates, so it’s worth doing your research or speaking to a broker to understand your options before you apply.
Final thoughts
There’s no denying that rising interest rates can put pressure on the family budget, especially when combined with other cost of living increases.
But small steps can make a meaningful difference.
Checking your rate, having a conversation with your lender, and understanding your options can help you feel more in control, even in a changing environment.
If you’re unsure where to start, begin with something simple like reviewing your rate or preparing for a quick call to your lender is often enough to get the ball rolling.
*Based on a $600,000 loan over 30 years, with an interest rate increase from 5.25% to 6%.
Jo and Carl Violeta are self-confessed numbers nerds, parents of an energetic toddler and a super switched-on teenager, and co-founders of the award-winning business, Violeta Finance. They are a husband and wife team who are passionate about empowering their community with financial education, love the odd glass of wine, and get a kick out of helping families achieve their homeownership and financial dreams.
www.violetafinance.com.au