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Borrowers spared another rate rise but relief could be short-lived, experts warn

Reviewed by Money Expert, Stephen Zeller
3 min read
4 Jul 2023

Borrowers groaning under the weight of engorged repayments have been spared a rate rise this month, but experts warn it’s not time to be complacent with future hikes predicted.

The rate rise relief comes as new research from Compare the Market found that 4% of Australians surveyed have applied for a mortgage hardship program with their lender in the last 12 months.

The research also revealed two-thirds of those that negotiated a rate rise discount with the lender in the last 12 months were successful, potentially saving hundreds of dollars in minimum monthly repayments.

Analysis from Compare the Market shows the average homeowner with a $585k loan has dodged an extra $95, that would have been heaped on repayments following another 0.25% rate rise.

Average monthly repayments have already surged $1415 since the rate rise cycle began in May 2022.

Borrowers on the high end of the rates spectrum were paying hundreds of dollars more, with a 0.70% difference between rates analysed by Compare the Market.

Compare the Market’s General Manager for Money, Stephen Zeller said while the pause on hikes offered some relief, further savings were available to borrowers willing to switch lenders or negotiate a better rate.

“It’s distressing to see so many Australians enter hardship programs, especially if more competitive rates are possible. Borrowers need to consider what options might allow them to get ahead now, and build a buffer so that they’re prepared for whatever else lies ahead,” Mr Zeller said.

“If your variable rate doesn’t have a 5 in front you could be spending more than you need on your repayments.

“The difference between some of the advertised rates we analysed was 70 basis points.

“An owner-occupier with a $600,000 loan could save $269 per month by switching from a rate of 6.24% to 5.54%”.

“Sending savings to an offset account or making use of a redraw facility are other ways to help you potentially reduce interest on your loan so that you can pay down the principal faster.”

Mortgage sizeThe difference between variable rates in the market
Difference in monthly minimum repayments between advertised rates of 6.24% and 5.54%
Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.24% compared to 5.54% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees.

But refinancing isn’t always an option for borrowers. The 300-basis serviceability point buffer, used to prevent people taking out excessive debts, has become a hurdle for people who entered the market when rates were low and no longer pass the stress test.

Australians with a $750,000 mortgage on a variable rate have seen monthly repayments grow $1,814 since the start of May 2022, following the 400 basis point jump.

The difference is even more stark for people coming off ultra-low fixed rates offered in 2021.

Mortgage sizeIncrease in average monthly repayments since the start of May 2022 (400 basis points) 
$500,000+ $1,209
$600,000+ $1,451
$750,000+ $1,814
$900,000+ $2,177
$1,000,000+ $2,418
Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 2.86% p.a in May 2022; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees. 

*Survey of 1,010 Australians, conducted in June 2023.

For more information, please contact:  

Phil Portman | 0437 384 471 | [email protected]

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and home loan products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.


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Written by Phillip Portman

When he’s not busy writing, Phillip can usually be found at the movies, playing with his Italian Greyhound Wilma, hanging out with his cockatiel Tiki, or talking about everything pop culture. He has a Bachelor of Arts in Communication and Journalism and has previously written about health, entertainment, and lifestyle for various publications. Phillip loves to help others and hopes that people learn something new from his articles.

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