Following three rate cuts last year, the RBA raised the cash rate by 25 basis points in February 2026. The move has had a knock-on effect on mortgages, with lenders hiking rates and borrowers on variable home loans already seeing their repayments rise.
The increase adds further pressure to Australian households already squeezed by rising living costs – but there are ways to soften the blow.
How much will a rate rise cost you?
A rate rise can increase your monthly mortgage repayments and add hundreds or even thousands of dollars a year to your home loan. How much more you’ll pay depends on your outstanding balance and how much your lender adjusts your rate.
To give you an idea of the potential impact, here’s what a 0.25% increase could mean for your repayments, assuming a rate rise from 6.00% to 6.25% on a 30-year home loan.
| Home loan amount | Original monthly repayment | New monthly repayment | Monthly increase | Annual increase |
|---|---|---|---|---|
| $400,000 | $2,398 | $2,463 | $65 | $780.00 |
| $500,000 | $2,998 | $3,079 | $81 | $972.00 |
| $600,000 | $3,597 | $3,694 | $97 | $1,164.00 |
| $700,000 | $4,197 | $4,310 | $113 | $1,356.00 |
| $800,000 | $4,796 | $4,926 | $130 | $1,560.00 |
| $900,000 | $5,396 | $5,541 | $145 | $1,740.00 |
| $1,000,000 | $5,996 | $6,157 | $161 | $1,932.00 |
| These figures are estimates only and are provided for illustrative purposes. They assume a standard loan term and interest rate change and do not take into account lender fees, charges, loan features or individual circumstances. Actual repayments may vary depending on your lender and loan structure. | ||||
Are there ways to reduce my mortgage costs?
Many households are already feeling the pinch with cost-of-living pressures, and rising mortgage costs can add to the burden. The good news is that there are several ways you could reduce your rate or your repayments.
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Negotiate a lower rate with your lender
Your home loan lender may be open to negotiation, especially if you have a solid repayment history and have built up equity in your property. Even after rates have risen, it can be worth approaching your lender to see what could be done. Comparing your current rate with others on the market and highlighting your value as a customer can encourage them to offer a better deal.
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Refinance your home loan
You don’t have to stay with the same loan for your entire mortgage term. If you think you could get a more suitable deal, either with your current lender or elsewhere, refinancing your home loan could help. Switching could get you a more competitive loan, whether that means a lower interest rate, reduced fees, or features better suited to your needs.
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Look into fixed rate or split rate loans
Locking in a lower rate now can give you some peace of mind. With a fixed rate loan, your repayments stay the same for a set period so you won’t be hit by unexpected increases. A split home loan lets you keep part of your balance on a fixed rate and the rest on a variable rate – giving you some certainty while still letting you benefit if rates fall.
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Use an offset account
An offset account is a savings account linked to your home loan, where the money you put in is used to reduce your loan balance – and with it the amount of interest you have to pay. The more you keep in the account, the less interest you pay – and even modest savings can make a noticeable difference over time.
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Extend your loan term
If your home loan repayments are putting pressure on your budget, increasing your loan term can reduce your monthly costs. While this approach makes repayments more manageable, it will increase the total interest paid over the life of the loan, so it’s best used as a short-term solution while exploring other ways to reduce costs.
A mortgage broker can help you navigate rising rates
If you’re unsure what to do as rates rise, a broker can help you make sense of your options. They can compare a range of lenders and loan products to see if a better rate or loan is available, negotiate with your current lender or help you refinance to a new one.
Don’t forget the bigger picture
Living costs are rising across the board, so it’s useful to review your household budget as a whole to see where you could save. Some of the easiest savings can come from checking you’re not overpaying for the basics, including:
- Car insurance: switching your car insurance is quick, easy and could save you hundreds of dollars a year. It takes less than five minutes to compare.
- Energy bills: with the Government’s Energy Bill Relief Fund ending in 2025, many households can expect energy bills to rise this year. Reviewing your plan and making sure you’re on a market rather than a default rate could help offset the increase. The best part about switching electricity or gas providers is how fast it is. The new company you switch to organises cancelling your agreement with your existing provider, so you could save on electricity in minutes.
- Health insurance: check you’re not paying for cover you don’t need and won’t use – and adjust it if you are. This is especially important with private health insurance costs set to jump by an average of 4.41% in April. So get to comparing health insurance plans.
By focusing on just these three areas, Australians could save over $2,000 a year on average, helping households stay on top of rising costs without having to compromise their lifestyle.