There were a series of interest rate increases, beginning in May 2022, and reaching its peak in November 2023. Rates then remained unchanged at 4.35% until the 0.25% cut in February 2025. A recent study, Five Economic Themes That Will Dominate the Next Parliament1, has revealed the consequences of the RBA interest rate hike cycle, with variable-rate mortgage holders having around $800 a month in additional repayments between mid-2022 and early 2024.
The research found that variable-rate mortgage holders paid $13,884 more in repayments than fixed-rate mortgage holders over the 18 months following interest rate rises.
This period of inflated interest rates placed immense strain on borrowers, especially those who were on a variable rate.
Despite the added strain, the study found that spending habits between fixed and variable rate mortgage borrowers hardly changed. 70% of borrowers funded the increases in mortgage repayments using savings. Just 26% had paid for the increased mortgage repayments with additional income streams.
The rate hike cycle also limited the number of people making excess mortgage repayments.
The research revealed that 70% of variable-rate borrowers made excess mortgage repayments before the rate hike cycle. As of the end of the study in April 2024, this dropped to around 25%.
The fluctuations in interest rates demonstrate the importance of establishing and maintaining an emergency fund buffer as an integral component of your strategic financial planning.
If you have not recently considered the impact of interest rate movements on your home loan, and your overall financial position, perhaps it’s time to reach out for a chat.
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