RBA interest rate tracker: What does an increase mean for your home loan?

Australians might have gotten accustomed to low interest rates during the pandemic period, but that’s all set to change following the RBA’s decision to tighten monetary policy in May. Prior to that, the last time the cash rate went up was in November 2010, so a shifting interest rate environment will take some getting used to — particularly among the 1.1 million borrowers who haven't experienced a cash rate above 0.1%. The graphs below provide a historical overview of the Aussie home loan market, along with details on which banks have raised their variable rates in response to the RBA's decision.

Reserve Bank of Australia cash rate

Variable rate home loans

2.44%

Lowest variable interest rate in the Mozo database.

3.65%

Average variable home loan rate for owner occupiers - July 2022.

$2,035

Initial monthly repayment on a $400,000 loan over 25 years - July 2022.

Latest changes to variable interest rates

When do new variable rates come into effect?

There is usually a gap between when lenders announce their plans to raise rates and when those changes take effect. The below graph shows how long lenders in the Mozo database waited before implementing their changes.
 

Lenders that have passed on the rate rise

Following the RBA’s May decision, the majority of lenders we track raised their variable rates in line with the cash rate, while a small handful passed on a partial hike to their customers (between 10 and 20 basis points). We expect the same to play out following the June rate hike.
 

Average new loan repayments across Australia

Average variable interest rates

The cash rate serves as a benchmark for variable home loan rates, which means that if the cash rate goes up, we can generally expect lenders to raise their commercial rates by the same amount. The graph below shows the relationship between the cash rate and variable rates for various borrower types.
 

 

Home loan rate change calculator

A variable rate home loan offers freedom and flexibility, but it also leaves you vulnerable to rising interest rates. If that happens, can your budget handle a higher monthly home loan repayment? Find out with our rate change calculator.
 

Loan details

Rate change

Repayment change if rates go up

Top variable home loan rates - July 2022

There are a number of reasons why someone might pick one home loan over another, but if pricing is a main concern, we’ve compiled the top variable rates from lenders we track below.
 

Credit Union SA - Variable Rate Package Home Loan Special Offer (Owner Occupier, Principal & Interest, LVR<80%)

2.44% p.a. (2.88% p.a. comparison rate*) variable rate

P&N Bank Logo

P&N Bank - & Basic Home Loan (Owner Occupier, LVR <60%)

2.44% p.a. (2.44% p.a. comparison rate*) variable rate

Queensland Country Bank Logo

Queensland Country Bank - Ultimate Home Loan Special (Principal & Interest, LVR<80%) (Package)

2.49% p.a. (2.88% p.a. comparison rate*) variable rate

Homeloans360 - Owner Variable

2.54% p.a. (2.54% p.a. comparison rate*) variable rate

Pacific Mortgage Group - Standard Variable Home Loan

2.54% p.a. (2.54% p.a. comparison rate*) variable rate

Calculate your home loan repayments

We can show you the monthly repayment amount for a range of loans.

home with heart

Frequently Asked Questions

What is the RBA cash rate?

The cash rate (also called official interest rates or the policy rate), is the interest rate on 'overnight funds.' These are the funds that banks lend to one another to cover the transactions they have to make on a daily basis.

When the Reserve Bank of Australia moves the cash rate up or down, it tends to shift the economic mood in ways that are believed to affect spending, investment, inflation and employment.

How does the cash rate affect home loan rates?

The cash rate directly affects variable home loan rates, so unless you’ve fixed your mortgage, you can expect your interest rate to increase by roughly the same amount. 

But the cash rate is one of several things banks have to take into account when pricing their loans. While it serves as a baseline, rates will differ across lenders depending on their business needs (think the cost of staff, branches, marketing, and interest paid out to customers).

For example, while the cash rate sat at 0.1% in early 2022, the average variable rate among Australian lenders was closer to 3% p.a. The difference ensures that banks are able to cover their operating costs and make a profit.

When does the RBA announce its decision?

The RBA meets on the first Tuesday of every month (except January). It announces any changes to the cash rate at 2:30 the same day.

How does the cash rate affect the economy?

Households and companies borrow money to spend, so if the cost of borrowing is high, we can expect them to dial down their spending. This impacts business profits, hiring and investment decisions, employment, wages and ultimately inflation.

Will higher interest rates cause property prices to fall?

Higher interest rates are known to have a dampening effect on property prices. This is because the higher cost of borrowing tends to discourage hopeful buyers, particularly first home buyers, from entering the market.

*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. Information accurate as at latest published date.*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. 

Information accurate as at latest published date.