Another Rate Rise on Cup Day?
5 Mortgage Checks to Make Before the RBA Decision
The Reserve Bank of Australia (RBA) meets again on Tuesday 3 November, Melbourne Cup Day, and another rate rise is on the table.
That’s not what anyone with a mortgage wants to hear. The cash rate has already gone up four times this year, from 3.60% in January to 4.60% after the September meeting. That’s the highest it’s been since 2011.
No one knows for sure what the RBA will do. Some economists expect a hold, while others think one more rise is coming. Either way, this is a good time to check your home loan is still working for you.
In this article, I’ll walk you through five simple checks you can do right now. None of them take long, and each one could put money back in your pocket or give you more peace of mind.
Why it’s worth checking now
When the RBA lifts the cash rate, most lenders pass it on to variable rate borrowers within a week or two. If your budget is already tight, even a small rise can make a real difference.
The good news is that you don’t have to wait and see. A quick review now means you’ll know exactly where you stand, whatever happens on Cup Day.
Check 1: Is your interest rate still competitive?
This is the biggest one. Many borrowers are paying more than they need to simply because they haven’t compared their rate in a while.
Lenders often save their sharpest rates for new customers. If you’ve had your loan for a few years, there’s a good chance your rate has drifted above what’s available in the market. This is sometimes called the “loyalty tax”.
Here’s how to check:
- Find your current interest rate on your latest statement or banking app.
- Note your loan balance and roughly what your home is worth.
- Compare it against current rates for borrowers like you.
You can use my Rate Review calculator to see how your rate stacks up against the best rates across my lender panel. It only takes a minute.
If you find a big gap, you have two options. You can ask your current lender for a better rate, or you can look at refinancing to a new lender. Sometimes just asking is enough. But having a real comparison in hand gives you a much stronger case.
Check 2: Can your budget handle another rise?
It helps to know exactly what another rate rise would cost you, rather than guessing.
Here’s an example. Say you have a $600,000 home loan over 30 years at 6.50%. Your monthly repayment would be about $3,790. If rates rise by 0.25 percentage points to 6.75%, that goes up to about $3,890.
That’s around $100 more each month, or $1,200 a year. It might not sound like much on its own. But after four rises this year, many households have already absorbed several hundred dollars a month in extra repayments.
To work out your own numbers, try my loan repayments calculator. Pop in your loan amount, term and rate, then add 0.25% to see the difference.
If the new figure makes you nervous, it’s far better to know now than to be caught out later.
Check 3: Do you have a cash buffer?
A cash buffer is money set aside for the unexpected. Think car repairs, a medical bill, or a few weeks off work.
When repayments rise, your buffer matters even more. It stops a surprise expense turning into a missed repayment or credit card debt.
A common rule of thumb is to keep at least three months of essential expenses, including your mortgage repayments, somewhere you can get to quickly. If that feels out of reach right now, start small. Even a few hundred dollars a fortnight adds up over time.
If you’re struggling to build a buffer because repayments are too high, that’s a sign it’s worth looking at checks 1 and 5 more closely.
Check 4: Are you using your offset account fully?
An offset account is a transaction account linked to your home loan. The money in it reduces the balance you pay interest on.
For example, if you owe $600,000 and have $30,000 in your offset, you only pay interest on $570,000. At 6.50%, that saves you about $1,950 a year in interest. And unlike paying the money off your loan, you can still get to it whenever you need it.
Many people have an offset account but don’t use it well. Here are some easy ways to get more from it:
- Have your salary paid straight into your offset account.
- Keep your savings and emergency buffer in the offset, rather than a separate savings account.
- Use a credit card for everyday spending, then pay it off in full from your offset each month. Only do this if you’re disciplined about clearing the card.
- Check your offset is 100% offset, not partial.
If your loan doesn’t have an offset account, it might be worth asking whether it’s available, or whether a loan with one would suit you better.
Check 5: Does your loan structure still suit you?
Your loan was set up for your situation at the time. But life changes, and so do lending options.
It might be worth reviewing your loan structure if:
- Your fixed rate is ending soon and you’ll roll onto a higher variable rate.
- You have other debts, like a car loan or credit card, at much higher rates.
- Your income has changed since you took out the loan.
- You’d like to split your loan between fixed and variable for more certainty.
- You’re paying fortnightly or monthly and want to adjust your repayments.
Refinancing isn’t right for everyone. There can be costs, like discharge fees, application fees or break costs if you’re on a fixed rate. That’s why it’s important to compare the full picture, not just the rate. My guide to home loan refinancing explains how it works and what to look out for.
What if you’re already finding repayments hard?
If you’re already struggling, don’t wait. Talk to your lender early. They have a legal obligation to consider hardship requests, and options may include a temporary pause, reduced repayments or a longer loan term.
It’s also worth getting independent help. A broker can look at whether refinancing or restructuring could ease the pressure. And the National Debt Helpline (1800 007 007) offers free, confidential financial counselling.
The bottom line
Another rate rise isn’t guaranteed. But there’s no harm in being prepared. Checking your rate, testing your budget, building a buffer, using your offset and reviewing your structure are all simple steps that put you back in control.
And if rates stay on hold, you’ll still be in a stronger position than before.
How I can help
At Awesome Lending Solutions, I compare home loans across more than 60 lenders to help you find one that fits your situation. I’ll look at your current loan, show you where you could save, and explain your options in plain English, with no pressure to change anything.
If you’d like a second opinion on your home loan before the next RBA decision, let’s have a chat. Call me on 02 7904 9560 or book a free home loan review.