The $10k loyalty tax you could be paying

 The RBA is set to officially hit pause on the cash rate hikes tomorrow for the first time this year, however, borrowers should do anything but.

A new Canstar survey of 2,891 home loan borrowers found just 6% have switched to a new lender in the past 12 months, while more than half (52%) have never changed providers at all.

Complacent borrowers likely to be on uncompetitive rates

An owner-occupier who took out a loan five years ago and hasn’t renegotiated since is likely to be on a rate of 6.98%. Yet Canstar data shows there are 40 lenders offering variable rates under 6%.

Assuming a borrower has a $600,000 balance today with 25 years remaining on their loan, refinancing to a rate under 6% could save at least $10,713 over the next two years, even after allowing for $1,150 in switch costs. This assumes rates move in line with CBA’s current cash rate forecast. 

Source: Canstar. Notes: calculations are estimates based on an owner-occupier paying principal and interest who took out a loan in June 2021 and today has $600k owing and 25 years remaining. Assumes the person has not renegotiated their rate since. Costs include $1,150 in switch costs, but not ongoing fees. Calculations assume rates change in line with CBA's cash rate forecast.

What is a decent home loan rate right now?

Canstar rate tracking shows:

Owner-occupier

• 6.26% is the estimated average variable rate.
• 5.69% is the lowest variable rate.
• 40 lenders have a variable rate under 6%.
• 5.99% is the lowest fixed rate for a 1-year term.

Investor

• 6.50% is the estimated average variable rate.
• 5.85% is the lowest variable rate.
• 45 lenders have a variable rate under 6.25%.
• 6.24% is the lowest fixed rate for 1- and 2-year terms.

Source: Canstar. Rates based on owner occupier loans. LVR and other requirements apply. Excludes green loans.

Impact of another 0.25 cash rate hike in 2026

While the RBA is set to pause in June, borrowers should not take this as confirmation the rate hikes are over, with Westpac expecting another hike at the next meeting in August.

For someone with a $600,000 mortgage and 25 years remaining at the start of the hikes, a 0.25 percentage point cash rate hike in August would increase monthly repayments by $92.

Across what would then be four hikes for the year in February, March, May, and potentially August, the total monthly increase would be $364. 

Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2026 at the RBA avg variable rate. Assumes next rate hike falls in August in line with Westpac’s forecast. Calculations assume banks pass on the hikes the month after. Changes are to minimum repayments. 

Savings rates continue to climb

Rate tracking by Canstar shows savings rates are now sitting at 14-year high, based on Canstar’s tracking, with the highest ongoing savings rate now sitting at 5.75% – 0.25 higher than what it was back when the cash rate was last at 4.35%.

The highest term deposit rate has now hit 5.70%, available from Rabobank for a 5-year term for balances over $500k up to $2 million.

Source: Canstar. Note: monthly conditions for bonus interest vary between accounts.

The RBA might be standing still, but you shouldn't

Canstar's Data Insights Director, Sally Tindall, says, “The RBA is expected to pause the rate hikes at the end of tomorrow's meeting. The Board previously expressed a desire to assess how households and the economy are holding up, and recent data provides it with the opportunity to do so.” 

“The RBA might be standing still, however, borrowers who follow suit could end up paying a premium.

“Canstar’s research shows half of borrowers surveyed have never switched lenders and those who haven't negotiated in years are likely overpaying.

“If this sounds like you, run the numbers on refinancing while the cash rate is on hold. You might uncover a substantial saving at a time when you need it most.

“Borrowers often assume loyalty will be rewarded, but in the mortgage market that’s rarely the case. In the last round of rate hikes, we saw a smattering of lenders cut variable home loan rates, but only for new customers.

“On the flipside, savers continue to benefit from higher rates, although it’s worth checking the fine print on any rate hike you might have received from your bank.

“The highest ongoing savings rate is now an extremely healthy 5.75 per cent, however, you have to be aged 18 to 40 to qualify.

“Meanwhile, the highest term deposit rate is now 5.70 per cent but only for amounts over half a million dollars with a half a decade commitment.

“What is highly uncertain is which direction the cash rate will go next and when. With inflation sitting at 4.2 per cent, the RBA is likely to keep the country on notice as more hikes could still be necessary.”