Impacts on repayments and borrowing capacity from recent rate rises

So we all know that the Reserve Bank of Australia has increased rates from historical lows to the current cash rate of 2.85%, this has been a continuous rate increase to try to mitigate and reduce inflation. Sadly Inflation figures have shown no signs of slowing or tapering. What does this mean? Well economists believe that because of this, we still have at least 3 rate rises to go before we will see an impact on the rate of Inflation growth. This is expected in 0.25% increases in December 22, February 23 and March 23.

So let’s look at a couple of examples.

Scenario 1 – Already Purchased

A couple bought a , Queensland for $620,000 in late 2020. They borrowed $500,000 and the best home loan they could get was a 2% p.a fixed rate for 2 years. Their repayments would have been about $426 a week. Next month they will come off the Fixed rate and would be put on the standard variable rate of 5.34%. Their new weekly repayment would be $643, a whooping $217 or 51% increase.

In this situation we would be suggesting to try to get a better rate through your current lender, if they won’t help,  reach out to us here at to see if we could Refinance your Home loan.

Scenario 2 – Seeking Pre-Approval

A young family is looking to purchase a new home, they have a reasonable income and live comfortably in their current rented home and have been able to save up a 20% deposit.  They have been working with who has shown them houses in Brighton, Redcliffe and North Lakes. They were able to get a Pre-Approval in late September from their bank for a maximum price of $800,000. They have finally found the perfect home and want to make an offer for $800,000. Since the pre-approval was issued, there has been 2 interest rate rises for a total of 0.50%. Sadly, the couple are going to get a shock when they go back to the bank, that $800,000 will now be closer to $750,000 only. This would be the perfect time to reach out to a and see how they can help, we may be able to find a different lender so you can still buy your dream house.

In a rising rate environment, it is vitally important for buyers and sellers to be aware of these issues and to ensure you communicate with your real estate agent and Mortgage Broker. When it comes to borrowing this is another reason to use a Home Loan Broker instead of directly with a bank.

Written by

Paul Halford

Home Loan Professionals – Moreton Bay to Sunshine Coast

Home Loan professionals has been established for 25 years with our core focus on South East Queensland. Paul Halford main areas are Moreton Bay to Sunshine coast, ranging from  North Lakes, Strathpine, Caboolture, Beerwah, Caloundra to Buderim.