Every time the RBA meets, half the country holds its breath. The good news? A rate hike doesn't have to throw your budget into chaos. A little prep now — and a calm plan for when it happens — goes a long way.
The Reserve Bank sets the cash rate, and when it goes up, lenders usually pass that increase straight on to variable home loans. You can't control what the RBA does. But you can control how ready you are for it.
Before a hike: get ahead of it
Stress test your budget. Work out what your repayments would look like if your rate went up by 0.5% or even 1%. If that number makes you sweat, better to find out now than when the letter from your lender lands.
Build a buffer. Any spare cash you can tuck into your offset account or redraw now does double duty — it cuts your interest today and gives you a cushion if repayments go up tomorrow.
Check your rate. Loyalty doesn't always pay. If you haven't looked at your rate in a year or two, there's a decent chance you're paying more than new customers are. A quick call to your lender (or your broker) can sometimes knock a bit off.
Thinking about fixing? Locking in some or all of your loan can give you certainty for a set period. Plenty of people split their loan — part fixed, part variable — so they get some protection without losing the flexibility of an offset. Just keep in mind fixed rates often already factor in expected hikes, and breaking a fixed loan early can come with costs.
If the RBA does hike: here's what to do
Don't panic. Your lender will usually let you know when your new rate kicks in and what your updated repayment is. It's normally not overnight — there's often a bit of lead time.
Know your new number. Check exactly how much more you'll be paying each month and adjust your budget to match. Small tweaks now beat a scramble later.
Quick example: on a $600,000 loan over 30 years, a 0.25% rate rise adds roughly $100 a month to your repayments. Not the end of the world — but it adds up if a few hikes stack on top of each other.
Shop around. A rate hike is a great excuse to see what else is out there. Lenders compete hard for good borrowers, and refinancing could offset some (or all) of the increase.
Keep paying extra if you can. If you were already paying above the minimum, try to keep that going. Every extra dollar still comes off your principal and saves you interest down the track.
Feeling the squeeze? If higher repayments are genuinely going to be hard to manage, talk to your lender early — don't wait until you've missed a payment. Lenders have hardship options, and they're much easier to work with when you reach out first.
The bottom line
Rate hikes are never fun, but they're a lot less scary when you've already done the maths. Build a buffer, know your numbers, and don't be afraid to ask whether you're on the best deal. If you'd like a hand checking your options, that's exactly what we're here for.
If all else fails, here are this week's totally scientific lotto numbers:
- 6
- 11
- 19
- 25
- 33
- 42
- 7
We're mortgage brokers, not psychics. Please don't put your deposit on these. If they do win, we'd appreciate a postcard.
