Interest rates including the inflation rate have been increasing worldwide due to a number of different factors. If you’re currently researching what these rate increases mean to you, we have prepared some answers to guide you.

How does an interest rate rise work?

Banks are expected to pass on the RBA’s rate hike to variable-rate customers, and they will also increase the deposit rates. Fixed mortgage rates have already risen with rising bond yields in anticipation of higher cash rates. The expectation is rates will rise roughly 2.5% by the end of the year and 3.5% by the middle of 2023.

How will the rise affect me?

Given household debt levels are at an all-time high, it will greatly affect consumer purchasing power. This means mortgage rates will be more expensive than before. We’re encouraged to reduce spending to combat inflation.

What will happen to my existing mortgage?

Loan affordability is one of the considerations in every mortgage application. The capacity to make loan repayments as a consumer is very important. If the cash rate rises, your home loan’s variable rate will increase as well. As a result, the interest rate on your home loan will increase. 

How will this affect my monthly loan repayments?

Here is a sample calculation of a 30-year loan with monthly principal payments and interest payments schedule: 


Loan Amount


Monthly repayment

on a 3.5% loan

Additional monthly repayments based on percentage increase
0.15% 0.25% 0.50% 2%
$500,000 $2,503 $41 $68 $136 $567
$750,000 $3,755 $60 $101 $204 $851
$1,000,000 $5,006 $81 $135 $272 $1135


The rate increases will add more costs to monthly loan repayments. 

What are my options to manage rate increases?

Options to look at are:

  • Do you have a  financial buffer in place
  • Shop around for a better rate (that can be with your current bank or a different lender)
  • Check your mortgage structure for maximum cash flow and tax benefit
  • Are there any other debts (credit cards / personal loans) that can be consolidated?
  • Are there areas in your spending that can be reduced?

If you are still worried about the rate increase, Micah Finance Solutions can search for the best options for your financial needs.

Schedule a Free Consultation today with our Finance Specialist.