There is still no word from the big four banks on what they intend to do after today’s 0.25 percentage point hike from the RBA.
Australia’s fifth biggest bank, Macquarie, however, has announced it will pass on the hike in full but not until 15 October.
This will take Macquarie’s lowest variable rate to 6.29%.
Rates likely to rise next Friday, but repayments take time
While the big four banks are yet to confirm their home loan rate decisions, based on the last hike in May, they will pass it on in full next Friday.
However, borrowers should know that monthly repayments won’t be going up this quickly.
Lenders must send customers a letter before adjusting their repayment and give them time to prepare for this higher amount. The big four banks provide the following notice after a customer has received their letter:
- CBA: Minimum of 20 days’ notice.
- Westpac: Minimum of 30 days’ notice.
- NAB: Minimum of 30 days’ notice.
- ANZ: Minimum of 30 days’ notice.
Exactly when a customer’s repayments will rise will also depend on how long it takes the banks to issue the repayment change letter and where the customer is in their billing cycle. This can take up two or three months in some cases.
What will a good rate look like now if banks pass today’s hike in full?
Once the dust settles on this hike, Canstar estimates:
- 6.49% will be the average owner-occupier variable rate.
- 6.25% will be a competitive owner-occupier variable rate, on offer from an estimated 40+ lenders.
- 5.94% is likely to be one the lowest variable rates on Canstar.
Who is going to struggle under higher rates?
The majority of Australian borrowers should be able to clear a hike on Tuesday, although for many households across the country, it won’t be easy or pretty.
Those likely to struggle include:
- People who borrowed at or near capacity when rates were at record lows.
- Households who can’t refinance because they don’t have 20% equity in their property. A growing concern now property prices are on the decline.
- Households who don’t have a buffer in their mortgage to fall back on.
The latest APRA data shows balances in offset accounts are at near record highs, yet CBA’s latest full year results show 15% of its mortgage customers have no buffer in their mortgage.
Big four bank customers’ home loan repayment buffers | ||
|---|---|---|
Accounts ahead on repayments | Accounts with no buffer | |
CBA | 85% | 15% |
Westpac | 86% | 14% |
NAB | 86% | 14% |
ANZ | 88% | 12% |
Source: Big four bank investor packs. CBA - 30 June 26, Westpac - 31 Mar 26, NAB - 31 Mar 26, ANZ - 31 Mar 26. Extra repayments include offset balances.
A further interest rate hike could be waiting in the wings
NAB’s economic team this afternoon confirmed its cash rate forecast, expecting the cash rate to remain on hold at 4.60% at the RBA’s next meeting.
ANZ was already forecasting one further RBA hike in November, which would bring the cash rate to 4.85%.
CBA and Westpac are yet to update or confirm their cash rate forecasts following today’s RBA announcement, with both banks previously acknowledging a risk of a further hike before Christmas.
Big banks’ cash rate forecasts for next RBA meeting | |
|---|---|
November | |
CBA | TBC |
Westpac | TBC |
NAB | On hold |
ANZ | +0.25 Nov |
Source: Prepared by Canstar.
Impact of 0.25 cash rate hike in November on monthly repayments | ||
|---|---|---|
Loan size at start of hikes | Hike in Nov | Cumulative increase across 5 hikes |
$500,000 | +$77 | +$380 |
$600,000 | +$92 | +$456 |
$700,000 | $107 | +$532 |
$800,000 | +$123 | +$607 |
$900,000 | +$138 | +$683 |
$1 million | +$153 | +$759 |
Source: Canstar. Based on an owner-occupier paying principal & interest with 25 years remaining in Feb 2026 at the RBA avg variable rate. Assumes rate hike in Nov and banks pass it on the month after. Changes are to minimum repayments.
What if borrowers can’t meet the new repayment amount?
Those who think they might not be able to afford their mortgage should take the following steps:
- Ask for a rate review. If you aren’t in a position to refinance, that doesn’t preclude you from asking for a rate cut from your own bank.
- If you secure a rate reduction, check your new minimum monthly repayments to see if you can clear this amount.
- If you can’t, call your bank, tell them you will have trouble meeting your new repayments and ask what your options might be. Do this before you miss a repayment.
- Get independent financial advice to make sure you’re on the right track.
What are some of the options the bank might offer?
Banks are required to offer support to customers struggling to meet repayments. Potential options might include:
- Switching to interest-only for a year or two.
- Making reduced payments for a period of time.
- Extending your loan term.
While each of these options can help reduce a customer’s minimum monthly repayments, they can be very costly in the longer term. It’s important to get independent advice before going down this road.
For example, switching to interest-only on a $600,000 loan with 25 years remaining could cut repayments by $432 a month, but add up to $28,296 in interest over the life of the loan.
Extending the loan term could be even more costly in the long run. By adding five years, a borrower could save $259 in monthly repayments, but add about $142,300 in interest.
Impact of switching or extending $600,000 loan | ||
|---|---|---|
Change to minimum monthly repayments | Extra cost over life of loan | |
Switch to interest-only for 2 years | -$432 | +$28,296 |
Extend loan term by 5 years | -$259 | +$142,300 |
Source: Prepared by Canstar. Notes: Based on an owner-occupier paying principal and interest on the average P&I rate of 6.49%, and an interest-only rate of 7.23% (Canstar estimates of RBA data). Assumes there is one more rate increase in 2026 and two rate cuts from mid-2027, as per CBA’s cash rate forecast. Does not factor in extra repayments.
What can borrowers do?
Canstar’s Data Insights Director, Sally Tindall, says, “Today’s cash rate hike hasn’t come out of the blue, yet the big four banks have decided to play a game of chicken to see who will break the bad news first.”
“However, if the last hike in May is anything to go by, their variable home loan rates will rise by 0.25 percentage points from next Friday.
“Now might not feel like a good time to negotiate your own personalised rate cut, but from what we can see in the data, banks are willing to offer individual rate cuts.
“Growth in the mortgage market is slowing with a sharp reduction in the number of new mortgage applications coming in the door from property sales, which means banks are now looking to fill that gap with existing borrowers looking to switch lenders.
“Over the last three months we’ve seen over 40 lenders cut new customer variable rates. This tells us there’s competition in the market, but only for those borrowers who do something about it.
“For many borrowers across the country, their finances will be able to stretch far enough to cover this fourth cash rate hike. It won’t be easy and it could mean dipping into buffers but they should be able to keep paying the mortgage.
“But for some borrowers, this could be their breaking point, particularly for those owner-occupiers who don’t have a buffer to fall back on.
“If that’s you, call up your bank for a rate review. See if you can get some relief that way but then, after this, if you still don’t think you can clear the higher amount, call your bank again and ask to go through the hardship options.
“When you do, make sure you get some independent advice that’s not from your bank to make sure you’re taking the right course of action. The National Debt Helpline is a good place to get this advice, particularly because it’s independent and comes at no cost to you.”
