5 ways to prepare for home loan rate hikes

Sometimes interest rate hikes are inevitable, but if you build up a buffer, budget carefully and watch your interest rate you can save a lot of money.

Last updated:

Anyone with a mortgage needs to keep an eye on their interest rate. This rate is a major factor in how lenders calculate the interest they charge on your home loan debt.

There are five things you can do to keep rate rises from blowing your budget up. Some of these steps are precautions you can take right now, such as saving a buffer, while others like refinancing are steps you can take when a rate rise hits.

1. Start building a buffer

Instead of making the minimum payment on your home loan, start adding a little extra to your repayments. You’ll be surprised how quickly this can add up, as evidenced by the calculator below.

Another strategy you can use is to make split your monthly repayment amount in half and pay it fortnightly rather than monthly. Paying fortnightly means you’ll end up making an additional repayment each year, as you can see below.

Monthly repayment: $3,000
Paid monthly: $3,000 x 12 = $36,000 per year
Paid fortnightly: $3,000/2 = $1,500. $1,500 x 26 = $39,000

This strategy will effectively put you a month ahead on your home loan repayments, which will give you a bit of a buffer should rates rise.

You can also work in your own interest rate buffer. Figure out your home loan repayment should variable rates rise, for example, by 2%.

This strategy also helps you build up a buffer of extra repayments, and it also has the benefit of getting you used to making higher repayments before your lender raises rates.

2. Try to negotiate a better rate

Many borrowers don’t realise that they may be able to negotiate a better rate with their current lender just by asking. If you call your current lender and tell them you’re considering refinancing, they may be able to offer you a discount on your current interest rate.

If your lender is willing to trim a few basis points off your current rate, future rate rises won’t hit you quite as hard. Should your lender hike its rate by 0.25%, getting yourself a 0.10% discount now means you’ll effectively get hit with only a 15 basis point hike in the future.

3. Work out a budget

Budgeting for future rate hikes now means you’ll be prepared when they become a reality. Again, using our repayments calculator you can see what your home loan repayment would be should rates rise. Even if you don’t proactively begin paying this higher amount, you can work out a budget to ensure you’ll be able to when it happens.

4. Consider fixing now

Fixing your entire home loan can always be a bit of a risky strategy. You’re wagering on the idea that variable rates are likely to rise rather than fall. While fixing means you’ll be insulated from rate hikes, it also means you won’t benefit from rate reductions. With this in mind, if you choose to fix your home loan rate you should do so to lock in a repayment you’re comfortable with.

Fixed rates are already beginning to rise, so time is of the essence in employing this strategy. In the past few weeks, lenders have hiked fixed rates by up to 60 basis points. Good deals on fixed rates still exist, though. If you lock in a rate now at a repayment level you know you can manage, you’ll have the peace of mind that you won’t face mortgage stress in the future.

5. Tackle other debts

You can free up some extra cash for the potential of higher home loan rates in the future if you focus on paying off other debts in the present. If you have a personal loan or credit card debt, devote yourself to attacking the debt now. This is a particularly important strategy if you have a variable rate personal loan.

If you focus on paying off debts that attract a higher interest rate, you’ll free up money that you can devote to home loan repayments. Should home loan rates begin to rise, the extra surplus cash you’ve freed up means you won’t be caught flat-footed.

Switch to a competitive fixed interest rate now

Rates last updated October 21st, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
2.99%
3.45%
$0
$10 monthly ($120 p.a.)
90%
Buy your home and lock in a low rate for the first two years. Available with a 10% deposit. Earn Velocity Frequent Flyer Points at settlement, monthly and every three years, plus extra bonus points for a limited time.
2.74%
3.61%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
2.99%
3.73%
$0
$375 p.a.
90%
Get a very competitive 3 year fixed rate with low fees and only a 10% deposit. Refinance to this loan and receive a $2,000 cashback when borrowing $250,000 or more.
2.88%
4.11%
$0
$375 p.a.
95%
$2,000 cashback for eligible refinancers. Get a very low fixed interest rate for two years plus package discounts. Available with a 5% deposit.
2.69%
3.37%
$395
$0 p.a.
80%
An online home loan offer with a fixed interest offer for 3 years.
2.84%
3.47%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online.
3.15%
3.89%
$500
$0 p.a.
95%
Lock in a low mortgage rate for 2 years and pay no ongoing fees. Includes a 100% offset account. Available with a 5% deposit.
3.32%
3.36%
$595
$0 p.a.
90%
A discounted variable rate with low ongoing fees and redraw facility. Low deposit option available.
2.99%
3.42%
$0
$10 monthly ($120 p.a.)
90%
A competitive fixed rate mortgage available with a 10% deposit. Earn Velocity Frequent Flyer Points at settlement, monthly and every three years, plus extra bonus points for a limited time.
2.88%
3.80%
$0
$395 p.a.
80%
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
3.15%
4.16%
$600
$0 p.a.
95%
Lock in a competitive interest rate for 1 year and pay no ongoing fees. Available with just a 5% deposit and includes a 100% offset account.
3.18%
3.83%
$0
$395 p.a.
80%
Get a low 3 year fixed rate with a 100% offset account and package discounts.
2.84%
3.53%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online.
2.99%
4.24%
$0
$395 p.a.
90%
Enjoy a competitive rate with no application fee for this package loan.
3.49%
4.06%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
3.15%
4.07%
$600
$0 p.a.
95%
Fix your rate for the first two years with this competitive, low-fee loan. Includes a 100% offset account. Get this loan with a 5% deposit.
2.79%
3.04%
$600
$10 monthly ($120 p.a.)
70%
A low fixed rate mortgage for borrowers with a 30% deposit. Comes with a 100% offset account.
2.99%
4.16%
$0
$395 p.a.
90%
Enjoy a discounted fixed rate and the ability to package the loan with other financial products.
3.15%
3.99%
$600
$0 p.a.
95%
Fix a competitive rate for 3 years, get a 100% offset account and pay no ongoing fees. Available with a 5% deposit.
2.79%
3.82%
$0
$0 p.a.
90%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.
3.15%
3.82%
$500
$0 p.a.
95%
Competitive 3-year rate for homeowners. Comes with a low deposit option and 100% offset account. No ongoing fees.
3.63%
3.92%
$0
$395 p.a.
80%
Fix your rate for the first year and take advantage of package benefits. Comes with a 100% offset account.
2.89%
3.62%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.54%
3.55%
$0
$10 monthly ($120 p.a.)
90%
Enjoy a competitive fixed rate with no application fee. Eligible borrowers can earn Velocity Frequent Flyer Points with this mortgage, and extra bonus points for a limited time.
2.84%
3.77%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
3.69%
3.45%
$375
$15 monthly ($180 p.a.)
80%
Home buyers with a 20% deposit can get this low interest-only rate. It also comes with a 100% offset account.
2.89%
4.07%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.

Compare up to 4 providers

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