Why You Should Review Your Home Loan After an RBA Rate Increase
Updated: Aug 17
When the Reserve Bank of Australia lifts the cash rate, variable mortgage repayments follow — usually within days. For many homeowners, the immediate reaction is frustration. But an RBA rate rise is also one of the most useful prompts there is to check whether your loan is still working for you. Not every borrower should refinance. But every borrower with a sizeable loan should at least look.
What a 0.25% Rate Increase Means in Real Dollars
Rate movements are often discussed in abstract terms — basis points, cash rate targets, lender margins. It's easy to lose sight of what they actually mean for your monthly budget.
Here's a concrete example. If you have a $700,000 variable rate home loan over a 25-year term at 6.50%, a 0.25% increase takes your rate to 6.75%. That's what the numbers look like:
Loan balance | Interest rate | Loan term | Monthly repayment |
|---|---|---|---|
$700,000 | 6.50% | 25 years | $4,726 |
$700,000 | 6.75% | 25 years | $4,836 |
That's an increase of $110 per month — or roughly $1,319 per year. For many Perth households, that's not an abstract number. It's groceries, fuel, school costs, insurance, or the difference between adding to your savings or slowly falling behind.
⚠ Multiple increases compound the effect
If you've had a variable rate loan for several years and rates have moved up multiple times without a review, the cumulative gap between what you're paying and what's available in the market may be significantly larger than a single 0.25% movement. Many existing borrowers are paying 50–100 basis points more than new customers at the same bank.
Could Refinancing Help? Here's What the Numbers Show
Refinancing isn't the right answer for everyone — but the numbers can make a compelling case for reviewing your options. Using the same $700,000 loan over 25 years, here's how monthly repayments change at different rates:
Interest rate | Monthly repayment | vs 6.75% (current) | Annual saving |
|---|---|---|---|
6.75% (current) | $4,836 | — | — |
6.25% | $4,618 | $218 less/month | ~$2,620 |
6.00% | $4,510 | $326 less/month | ~$3,910 |
5.85% | $4,446 | $390 less/month | ~$4,680 |
These are indicative figures only, based on principal and interest repayments. Actual rates and savings will depend on your loan balance, term, and lender. Fees and costs of refinancing should be factored into any comparison.
"Even a relatively small difference in interest rate can translate to thousands of dollars a year on a large mortgage balance. The question isn't whether to react — it's whether to act."
Refinancing Is Not Just About Chasing the Lowest Rate
A lower rate is a good outcome — but it shouldn't be the only thing driving a refinance decision. A proper review should also assess:
Whether the loan has offset or redraw features that suit how you manage your money day-to-day
Whether the repayment type and loan structure still match your current goals
The full cost of switching — including discharge fees, application fees, valuation costs, and government registration charges
Whether negotiating with your existing lender could deliver a similar result without the paperwork of a full refinance
Whether your property value and equity position have improved since you first borrowed, potentially opening up better loan-to-value ratio pricing
Whether your income and financial position would support a new approval at a different lender
Sometimes the right outcome is a full refinance to a new lender. Sometimes it's a rate negotiation with your existing bank. And sometimes the honest answer is to leave the loan alone — because the saving doesn't justify the cost and effort of moving.
Why Your Existing Bank May Not Be Giving You Its Best Rate
This is one of the more frustrating realities of the Australian mortgage market: loyal customers are frequently not rewarded. Banks regularly advertise sharper rates to attract new borrowers while existing customers quietly drift onto less competitive pricing over time.
This isn't necessarily bad faith — it's simply how bank pricing tends to work. But it does mean you should never assume your rate is still competitive just because it was good when you originally took out the loan.
Your position may have improved since you first borrowed
If your loan was approved a few years ago, several things may have changed in your favour: your income may be higher, your loan balance is lower, your property value in Perth may have increased, and your equity position is likely stronger. All of these factors can mean you now qualify for a more competitive rate or structure than the one you're currently on.
When a Review Is Worth Having
Refinancing may make sense if:
| Refinancing may not be worthwhile if:
|
⚠ A note on debt consolidation
Rolling personal loans, credit cards, or car finance into your home loan can reduce your monthly repayment and simplify your finances — but it can also convert short-term debt into 25-year debt if there's no clear repayment strategy. The total interest cost over time can be considerably higher. This is worth modelling carefully before proceeding.
The Right First Step
The first step isn't to apply with another bank. The first step is to compare your current loan against what's realistically available for your situation right now — based on your income, property value, loan balance, equity, and goals.
A good review should answer three clear questions:
Is my current rate still competitive against what's available in the market today?
Would moving lenders actually save money after all fees and costs are factored in?
Is my loan structure still the right fit for what I want to achieve over the next few years?
Once those questions are answered clearly, you can make a calm, informed decision rather than reacting emotionally to the latest rate movement.
Final Thought
An RBA rate increase is never welcome. But it is a useful reminder that your mortgage shouldn't be set-and-forgotten. On a loan of $600,000, $700,000 or more, even a 0.50% difference in rate represents several thousand dollars a year — and over the remaining term of your loan, potentially tens of thousands.
The goal isn't to refinance for the sake of it. The goal is to make sure you're not paying more than you need to — and that your loan structure is still working in your favour.
General information only. This article does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for your circumstances before making any financial decision. Credit Representative Number 439731.
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