Home loan interest rates Australia

Home loan interest rates

Looking at the current and projected interest rates in Australia

Last Updated: 1st August 2024

Current interest rates

Australia’s current official interest rate is the cash rate of 4.35%, presently retained by the Reserve Bank of Australia (RBA), despite higher-than-expected inflation. The cash rate is determined in the RBA’s board meetings which takes place eight times a year.

Click on the highlighted text if you're looking to compare the current home loan interest rates in Australia.


Home loan interest rates

A typical home loan term in Australia is structured for 15 to 30 years, but there may be circumstances that will shorten the loan repayment period, for example, a substantial deposit that is a much larger amount than the average 10% of the purchase price.

Lenders do offer a fixed interest rate on a 30-year mortgage, however the fixed interest rate period would be for 1-5 years. Although there are a small number of lenders that would offer fixed rates for up to 10 years, the rates are usually so high that it may not be worth your while.

On 29 July 2024, the lowest home loan rate was 5.89% p.a. and the comparison rate (this includes the interest rate, as well as fees and charges relating to a loan) was 6.07% p.a. for first-time buyers, for upgrading, investing or refinancing.

In Australia, borrowers often choose variable-rate loans or split loans, which combine fixed and variable rates, to balance stability and flexibility. The choice between fixed and variable rates depends on individual financial circumstances and market conditions. Understanding these options can help borrowers make informed decisions that align with their financial goals and risk tolerance. Additionally, many lenders offer features like offset accounts and redraw facilities, which can help borrowers save on interest and manage their loans more effectively. This is why it can be advantageous to speak to a mortgage broker who can offer, free, impartial advice for your specific circumstances - this is one of the many reasons why over 70% of mortgages go through a broker in Australia.


Average interest rates

Since May 2024, Australian lenders have offered an average home loan interest rate of 6.37%.


Historical trends

The impact of the COVID-19 pandemic in 2020 brought about emergency rate cuts. In response, the RBA decreased the interest rate to an unforgettable low of 0.25% and even lower, to 0.10% in November.


However, by May 2022, they were forced to increase the rates again to fight rising inflation that reached 2.85% towards the end of that year. By June 2023, the cash rate reached 4.10%, which was retained until November 2023 when it was increased once again to 4.35% (25 basis points).


Highest and lowest interest rates recorded

 The following indicates the trends in Australia’s interest rates between 1990 and 2024 according to the RBA:


AUSTRALIA INTEREST RATES

  • HIGHEST: Jan 1990 – 17.5%

  • LOWEST: Nov 2020 – 0.1%

  • AVERAGE: 3.87%



Future Predictions: Predictions for 2024

With the multiple increases in the interest rate between May 2022 and December 2023, the RBA holding the cash rate at 4.35% since November 2023, and the decrease in the inflation rate, economists at the Big Four banks expect that the RBA will start cutting the interest rate toward the end of 2024.

However, that remains to be seen as the RBA will determine whether rates will be lifted by 25 more basis points to 4.6% or not, when they meet on 5-6 August 2024. Although the RBA had hopes to return inflation to a target of 2% to 3%, most recent inflation data showed an increase from 3.6% to 4%.


The following big banks seem to agree that the cash rate is at its peak, but have different predictions for the near future:


ANZ

  • The current level of 4.35% will be the cash rate’s peak.

  • First cuts to start around February 2025.

  • Rates dropping to a level of around 3.60% by end of 2025.


CommBank

  • The current level of 4.35% will be the cash rate’s peak.

  • First cut likely to occur around November.

  • Rates eventually dropping to around 3.10% by end of 2025.


NAB

  • The current level of 4.35% is the cash rate’s peak.

  • First cuts to occur around May of 2025.

  • Rates reducing to 3.60% by end of 2025.


Westpac

  • The current level of 4.35% will be the peak.

  • First rate cuts to occur around November.

  • Cash rate eventually settling at 3.10% by end of 2025.


Factors influencing future rates

To start with, the inflation rate. When it is high, the RBA has to increase the cash rate to pull down inflation. This leads to higher loan rates and savings interest rates, making it more expensive to borrow money and hopefully deterring borrowers from taking loans and reducing their spending.

An increase in the demand for money or credit will also cause a raise in interest rates. Alternatively, a decrease in the demand for credit will decrease interest rates.

Impact on Home Loans


How interest rates affect home loans

The lenders are very likely to pass on a rise in home loan rates to their customers, as soon as their next payment. If you have a variable rate home loan and there is an increase in the interest rates, your rate will increase, as will your payments. If you have a fixed-rate home loan, you will pay the newly increased rates when the variable stage begins.

An increased interest rate on your home loan will cause more of your payment to go toward the interest instead of the principal. Alternatively, when it decreases, more of your payment goes toward the principal, which will cause you to pay off your home loan faster.

Use our Mortgage Repayment Calculator to see how the interest rate impacts your repayments on your home loan.


Comparing different home loan interest rates

It is in the borrower’s best interest to compare different home loan interest rates on offer. The different lenders have numerous costs they provide for in their loans. Different lenders are willing to take different levels of risk, but they will all consider the borrower’s ability to repay their loan.

Lenders are usually within 0.25% points of each other, so be wary about an interest rate that stands out. The interest rates on offer are influenced by the following factors:

  • Their overhead cost structure, for instance, office space cost, insurance costs, and employees’ cost-to-company salaries.

  • Your financial history, which will indicate your ability to make payments on time, to not fall behind or stop paying on your home loan.

  • Closing costs (service fees you pay to your real estate attorney and home loan lender). These costs are directly connected to the interest rate that will be offered to you. It will be in your best interested to enquire about these costs.

Are you keen to refinance your home loan at better rates? Use our Refinance Savings Calculator to help you make the best choice.

Special Interest Rates: Car loan interest rates

Interested to buy a new vehicle, but you need a car loan? Make sure that you pay close attention to interest rates as they will affect your repayments, as well as the total cost of the loan.


Factors that will usually affect your car loan interest rates include:

  • If it is a new or used vehicle (the age of the vehicle)

  • The type of vehicle

  • Your financial status

  • The type of loan, determined by whether it is secured or not.

  • The total amount that you have to borrow


Should you be offered a very low or 0% interest rate, don’t be deceived. There are probably a load of hidden costs and strict conditions involved. Compare rates and find a car loan with an interest rate that includes features and conditions to secure your financial situation.


Other types of loans
Whether you need a loan to consolidate your debt or a personal loan for a wedding, to travel or to renovate your home, compare interest rates, total loan amounts, hidden costs, terms and conditions offered by different lenders. It will be to your advantage to do your research well, in order to find that offer that will give peace of mind.

Are you interested to know more about personalised rate comparisons, contact our Online Mortgage Broker to unlock the best home loan for you.

 

Compare rates from multiple lenders

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