Our Home Loan Rate Change Calculator helps you estimate how an increase or decrease in interest rates could affect your home loan repayments. Whether you’re preparing for the Reserve Bank cash rate decision, reviewing your mortgage or considering refinancing, our calculator provides a quick estimate of how much your repayments could change.
By comparing your current repayments with your estimated new repayments, you can better understand the financial impact of interest rate movements and plan your household budget with confidence.
How to Use the Home Loan Rate Change Calculator?
Using the calculator is simple. Enter the following information to receive an estimate of your updated home loan repayments.
- Your current interest rate: Enter the interest rate you’re currently paying on your home loan.
- Repayment type: Choose the type of loan repayments you currently make.
- Interest rate change: Enter the expected increase or decrease to your interest rate.
- Current loan balance: Enter the remaining balance on your home loan.
- Loan term remaining: Enter the number of years left on your mortgage. Most home loans have terms of 25 or 30 years, but simply enter the time remaining on your own loan.
- Repayment frequency: Choose how often you’d like to view your repayments, whether it’s weekly, fortnightly or monthly.
After entering your details, the Home Loan Rate Change Calculator will estimate:
- Your current minimum home loan repayment
- Your new estimated repayment after the interest rate change
- The difference between your current and new repayments
- The estimated increase or decrease over your chosen repayment frequency
These figures are estimates only and can help you understand how changes in mortgage interest rates may affect your budget.
How Often Do Home Loan Interest Rates Change?
There is no fixed schedule for home loan interest rate changes. Interest rates remain unchanged for months or even years before changing. In other periods, lenders may adjust rates several times within a short timeframe.
Home loan interest rates are influenced by a range of factors, including changes to the Reserve Bank of Australia’s official cash rate, funding costs for banks and lenders, competition between lenders, inflation and broader economic conditions, global financial markets and finally operational costs and business strategy.
While many lenders adjust their rates after an official cash rate decision, they are not required to do so. Each lender independently decides whether to increase, decrease or leave interest rates unchanged.
Why Should You Compare Home Loan Rates Regularly?
Interest rates and mortgage products change frequently. Comparing home loans regularly may help you find a lower interest rate, reduce your repauments, access better loan features, and potentially save thousands of dollars over the life of your loan.
Why Do Home Loan Interest Rates Increase?
Home loan interest rates commonly rise following an increase in the Reserve Bank of Australia’s cash rate. The cash rate is the interest rate charged on overnight loans between financial institutions. When this rate increases, borrowing money becomes more expensive for banks. Many lenders pass some or all of these higher funding costs on to borrowers through higher home loan interest rates.
However, the cash rate isn’t the only reason mortgage rates increase. Lenders may also raise rates because of higher wholesale funding costs, inflation, market competition or business and profitability objectives. Every lender assesses these factors differently, which is why mortgage rates can vary significantly between providers.
How Does an Interest Rate Increase Affect Your Mortgage Repayments?
The impact depends on the type of home loan you have. If you’re on a variable rate home loan, your repayments will generally increase when your lender raises its interest rate. Even a small increase of 0.25% can add thousands of dollars in interest over the life of a mortgage, depending on your loan balance and remaining long-term.
If you’re on a fixed-rate home loan, your repayments usually remain the same throughout your fixed-rate period. Once your fixed term expires, your loan typically reverts to the lender’s standard variable rate unless you refinance or choose another fixed rate option. At that point, your repayments may increase if interest rates are higher.
How to Deal with an Increase in Interest Rates?
If your lender announces an interest rate increase, taking action early can help reduce the impact on your finances. First off, use our home loan rate change calculator to estimate how much your repayments could increase and understand how the change will affect your monthly budget. Identify areas where you may be able to reduce discretionary spending so you can comfortably manage higher mortgage repayments.
Contact your lender and ask whether they can offer a more competitive interest rate. Many lenders have lower rates available for new customers, and existing borrowers may be able to negotiate a better deal simply by asking.
However, if your current lender is no longer competitive, refinancing your home loan may help you secure a lower interest rate, reduce your repayments or access better loan features. Before refinancing, compare interest rates, fees, loan features, and the total cost over the life of the loan.
Ways to Reduce the Impact of Rising Interest Rates
If mortgage rates are increasing, several strategies may help minimise the financial impact.
- Compare Home Loan Rates: The home loan market changes regularly. If you haven’t reviewed your mortgage in several years, there may be more competitive products available that better suit your needs. Comparing home loan interest rates can potentially save thousands of dollars over the life of your mortgage.
- Refinance Your Home Loan: Refinancing allows you to switch lenders or change loan products. Depending on your circumstances, refinancing may help you secure a lower interest rate, reduce your monthly repayments, and access additional loan features.
- Use an Offset Account: An offset account is a transaction account linked to your home loan. The balance in your offset account reduces the portion of your home loan on which interest is calculated. For instance, if you owe $500,000 and have $40,000 in your offset account, you’ll generally only pay interest on $460,000. Over time, this can significantly reduce the total interest paid and help you pay off your mortgage sooner.
- Make Extra Repayments: Paying more than the minimum repayment directly reduces your loan principal. This means you’ll pay less interest over time and may shorten the life of your home loan. Even small additional repayments made consistently can make a meaningful difference.
- Consolidate Existing Debts: If you have personal loans, credit cards, or other debts, consolidating them into your home loan may simplify your finances by combining multiple repayments into one. Before consolidating debt, consider the long-term cost, as extending short-term debt over a longer home loan term could result in paying more interest overall.
- Review your Spending: Regularly reviewing your household expenses can help identify opportunities to free up extra cash. Redirecting these savings towards your mortgage repayments may reduce interest costs and help you build equity faster.
