interest rates expected to sky rocket another 25 basis points
Another rate rise will likely see repayments since the rate rises begun rise to above $10,000. Image: Canva.
  • The cash rate is predicted to rise to 3.35 per cent in February.
  • Mortgage holders will be paying $11,172 more per year.
  • Experts advise shopping around for best home loans.

It is widely expected that interest rates will increase by 25 basis points tomorrow. While the increase to the cash rate will be smaller than the more significant figures from early to mid last year, pressure continues to mount for mortgage holders.

Should the Reserve Bank of Australia (RBA) raise the cash rate by 25 basis points (also referred to as 0.25 percentage points), it will take the current 3.15 per cent interest rate to 3.35 per cent; that will also make it a 325 basis point rise since February 2022.

How much more will home loans cost?

Analysis by banking, insurance, energy and broadband comparison site Mozo, has found that borrowers with the average variable rate in February 2022 of 3.08 per cent would be facing a 6.33 per cent interest rate if their lender passed on all the rate increases.

The analysis found that this will have added $11,172 to the yearly cost of a $500,000 loan for an owner occupier paying principal and interest.

Month RBA cash rate increase Variable interest rate Monthly repayments Yearly repayments
February 2022 3.08% $2,392 $28,704
March 2022 3.08% $2,392 $28,704
April 2022 3.08% $2,392 $28,704
May 2022 0.25% 3.33% $2,458 $29,496
June 2022 0.50% 3.83% $2,592 $31,104
July 2022 0.50% 4.33% $2,731 $32,772
August 2022 0.50% 4.83% $2,874 $34,488
September 2022 0.50% 5.33% $3,020 $36,240
October 2022 0.25% 5.58% $3,094 $37,128
November 2022 0.25% 5.83% $3,170 $38,040
December 2022 0.25% 6.08% $3,246 $38,952
February 2023 0.25% 6.33% $3,323 $39,876

Source: Mozo, calculation based on a $500,000 loan, starting with the average interest rate in February 2022 (3.08 per cent).

Mozo found that 52 lenders have passed on all rate hikes in full last year, with the average variable interest rate in the company’s database now at 5.68 per cent.

The lowest rate on the database was 4.29 per cent through The Mutual Bank, with Mozo finding borrowers could save up to $4,848 per year off their mortgage by refinancing to that lowest current level. The next lowest interest rates were by Unloan at 4.44 per cent and Reduce Home Loans at 4.48 per cent.

Mozo noted that the above lowest interest rates were for owner occupiers paying principal and interest on a loan with 80% LVR on a $400,000 loan.

Lender Home Loan Variable Rate Comparison Rate
The Mutual Bank Special Budget Home Loan 4.29% 4.30%
Unloan UnLoan Variable 4.44% 4.35%
Reduce Home Loans Capitalizer Variable 4.48% 4.43%
Hume Bank lite-Blue Rate 4.49% 4.40%
Bank of Sydney Basic Home loan 4.54% 4.56%

Source: Mozo as at 1 February 2023, leading variable rates for owner occupier, principal and interest home loans at $400,000, 80% LVR.

“Lazy home loan customers shouldn’t just sit back and watch their variable rate increase, they need to be proactive. Lenders often have lower interest rates to attract new customers, so borrowers need to take-charge,” says Claire Frawley, Personal Finance Expert at Mozo.

According to the RBA November Lender’s Interest Rate data, the average new lending variable interest rate is 4.79 per cent, 50 basis points below the outstanding loan average variable rate 5.29 per cent.

Frawley said, “If you have watched your variable rate rise in-line with the RBA cash rate increases, then it’s time to do something about it and refinance.”

A number of lenders are also offering discounts to borrowers with more equity.

“The rising cost of living continues to drive up the cost of household expenses, so investing a bit of time into researching home loans to see if you can reduce your repayments and keep more money in your pocket is time well spent” she said.


Disclaimer: This article contains general information and should at no time be considered financial advice to the reader. The reader should always verify their situation with their financial advisors before taking any further steps. 

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