In 2026, the Reserve Bank of Australia (RBA) increased the cash rate by a combined 0.75 percentage points, bringing the cash rate target to 4.35%. The RBA has kept the rate unchanged since May, but inflation remains elevated, and there is still uncertainty around where interest rates may go next.
For homeowners, higher rates can mean higher mortgage repayments.
What Do Higher Interest Rates Mean for Your Mortgage?
The RBA’s cash rate influences the interest rates banks charge on loans, including mortgages. When the cash rate rises, lenders generally increase variable home loan rates, which can lead to higher repayments for borrowers.
The RBA reported that variable mortgage rates increased by nearly 75 basis points between January and June 2026, while scheduled mortgage payments increased to close to their 2024 peak as a share of household disposable income.
Even a relatively small change in your interest rate can make a noticeable difference over the life of a large home loan.
That’s why it’s important to focus not only on today’s interest rate, but also on how well your household budget could cope if rates remained higher for longer.
What should you do if you already have a Home Loan? If you’re already paying a mortgage, there are several ways you may be able to reduce the pressure created by higher repayments.
1. Review Your Current Home Loan Rate
One of the simplest places to start is by checking the interest rate you’re currently paying.
With competition between lenders, another lender may offer a more competitive rate or loan structure that better suits your circumstances. The RBA has noted that some lenders have reduced advertised variable rates on selected products despite the higher cash rate environment.
However, don’t look at the interest rate alone.
Consider the loan’s fees, features, flexibility, fixed or variable structure, and any costs involved in switching.
A home loan review can help you understand whether your current loan is still competitive.
2. Consider Refinancing
Refinancing involves replacing your existing home loan with a new loan, potentially with another lender.
Depending on your circumstances, refinancing may help you:
- Secure a more competitive interest rate
- Reduce your monthly repayments
- Access a more suitable loan structure
- Consolidate eligible debts
- Make better use of features such as an offset account
- Review your overall borrowing strategy
But refinancing isn’t automatically the right choice for everyone. There may be application fees, discharge costs, valuation fees, or other expenses involved.
The important question is whether the potential long-term benefit outweighs the costs of switching.
3. Make Your Offset Account Work Harder
If your home loan has an offset account, keeping surplus savings in it can reduce the amount of your loan balance that interest is calculated on.
For example, if you have a $600,000 home loan and $30,000 in an eligible offset account, interest may effectively be calculated on $570,000 rather than the full $600,000.
The exact benefit depends on your loan structure and circumstances, but an offset can be a useful tool for managing interest costs while keeping your savings accessible.
4. Review Your Household Budget
When mortgage repayments increase, small changes to your household budget can become more important.
Review:
- Subscriptions you rarely use
- Insurance premiums
- Utilities and phone plans
- Personal loans and credit card balances
- Discretionary spending
- Regular savings commitments
The goal isn’t necessarily to cut everything.
Instead, identify where your money is going and create a realistic buffer for higher mortgage repayments and unexpected expenses.
5. Don’t Ignore Your Mortgage Until It Becomes a Problem
One of the biggest mistakes homeowners can make is waiting until repayments become unaffordable before reviewing their options.
If you’re concerned about your ability to meet future repayments, speak with your lender or mortgage broker early.
The earlier you understand your options, the more choices you may have.
What If Interest Rates Rise Again?
Nobody can know exactly what the RBA will do at its future meetings. That uncertainty is exactly why homeowners should focus on financial resilience rather than trying to perfectly predict the next RBA decision.
Instead of asking “Will rates go up or down?”, consider asking “Would my finances still work if rates stayed higher for longer?”
That’s a much more useful question.
At Goodwill Finance, we can help you review your current home loan and understand your situation better so that you can make informed decisions. If you want to contact us, you can give us a call at 0423 459 480 or email us at [email protected].
Disclaimer: The information provided is of a general nature and does not take into account your personal financial circumstances, goals, or needs. It should not be considered financial or investment advice, nor a recommendation or invitation to acquire financial products or services. You should not act solely on this information without obtaining professional financial advice tailored to your situation. Any loan application is subject to a full assessment of your financial position, as well as the lender’s terms, conditions, fees, charges, and eligibility criteria.
