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Your Guide to the Latest Interest Rate Update in Australia
As of November 2024, the Reserve Bank of Australia (RBA) has kept the cash rate target at 4.35%, a vital factor that influences home loan interest rates and can directly affect your mortgage costs.
Here at Q Financial, our team is dedicated to helping you understand how the latest interest rate update in Australia may affect your mortgage strategy. This page will walk you through the definition of cash rate, the role of the RBA in setting it, and its impact on home loan rates. You’ll also gain insights into typical mortgage rates, strategies for navigating the loan market, and an overview of lenders that offer home loans. With this resource, you can make informed financial choices with confidence.
Understanding the Cash Rate’s Role in Home Loan Interest Rates
The cash rate, set by the RBA, represents the interest banks charge each other for short-term “overnight loans.” This rate is a foundation for various interest rates across the economy, including those for savings accounts, home loans, personal loans, and term deposits. By adjusting the cash rate, the RBA manages inflation, employment, and economic stability. For example, if inflation is high, the RBA might raise the cash rate to temper spending, whereas if economic growth is a priority, they may lower it to boost borrowing.
Home loan rates tend to adjust according to the cash rate’s movement. When the cash rate decreases, lenders typically reduce their interest rates, making monthly repayments more affordable for both current homeowners and those buying their first home. Conversely, an increase in the cash rate usually results in higher mortgage rates, raising the cost of monthly payments. Shifts in the cash rate — no matter how subtle — can influence your loan expenses over time, so staying informed on these updates is vital for making sound mortgage decisions.
Current Mortgage Interest Rates
Although the RBA cash rate acts as a guide for lenders in setting home loan rates, actual mortgage rates differ based on factors such as the interest rate type (fixed or variable), the term length, and your loan-to-value ratio (LVR).
Variable Rates
Variable home loan rates often align closely with the cash rate, changing as the RBA adjusts its policies. At present, owner-occupier loans with principal and interest payments average around 6.67% for variable rates, though this number will vary depending on your lender and borrower profile. Variable rates are ideal if you seek flexibility, but remember that if the cash rate rises, your repayments may also increase.
Fixed Rates
Fixed-rate mortgages in Australia are influenced by the term you select, typically ranging from one to five years. Shorter terms often come with lower fixed rates, while longer terms provide the benefit of stable, predictable repayments, which can be beneficial if you prefer to avoid interest rate fluctuations.
Rate Differences Between Investors and Owner-Occupiers
Investor loans tend to carry higher rates compared to owner-occupier loans, as lenders view investment properties as higher risk. Regardless of the borrower type, both investors and owner-occupiers can explore fixed and variable options to find competitive rates that suit their financial goals.
Overview of Lenders Offering Home Loans in Australia
Below, we list various Australian lenders offering home loans. You can click on their links to see their latest interest rate update as of today.
The Big Four Banks
These major banks lead the home lending market in Australia, offering a comprehensive range of loan products and banking services.
- Australia and New Zealand Banking Group (ANZ): Offers various home loan options with flexible repayment choices and digital tools for easy management.
- Commonwealth Bank of Australia (CBA or CommBank): Australia’s largest bank, providing a wide selection of home loans, including personalised support and flexible rates.
- National Australia Bank (NAB): Offers loans with adaptable features, such as fixed and variable rate options, alongside digital tools for mortgage management.
- Westpac Banking Corporation: Provides a broad array of loan options, including features like split loans and offset accounts.
Other Major Banks
Although not part of the Big Four, these reputable banks are established across Australia, providing various financial products, including home loans.
- AMP Bank: Features competitive home loan rates with flexible options.
- Bank of Queensland (BOQ): Delivers personalised service and flexible home loan choices.
- BankSA: A Westpac subsidiary offering home loan products for South Australians.
- Bankwest: Part of Commonwealth Bank, offering various home loan products mainly in Western Australia.
- Bendigo and Adelaide Bank: Known for community-oriented banking and competitive home loan offerings.
- Internationale Nederlanden Groep (ING): Renowned for online banking and straightforward home loan applications.
- Macquarie Bank: Offers a range of mortgage solutions with flexible terms, including investment loans.
- St.George Bank: Another Westpac subsidiary offering diverse home loan features.
- Suncorp Bank: Primarily serving Queensland, providing a comprehensive range of home loan products.
- Virgin Money: Digital-focused bank delivering a variety of home loan options.
Mutual Banks or Customer-Owned Banks (Credit Unions)
Often reinvesting profits for their members’ benefit, these member-owned banks typically provide home loans at competitive rates and flexible terms.
- Auswide Bank: Offers a community-focused range of home loan products.
- Heritage and People’s Choice: Recently merged, offering a comprehensive selection of home loan products.
- Newcastle Permanent: Serves Newcastle and nearby areas with various home loan options.
Specialised Customer-Owned Banks (For Specific Professions or Communities)
These customer-owned banks provide targeted services, especially home loans, for specific professions or community groups.
- Australian Military Bank: Caters to Australian Defence Force personnel with specialised financial products, including home loans.
- Firefighters Mutual Bank: Offers home loans and financial services catered to firefighters.
- P&N Bank: The largest locally owned bank in Western Australia, originally established for police and nurses, offering a range of home loans.
- Teachers Mutual Bank: Provides home loans and financial products for educators, university staff, and professionals in related sectors, including healthcare.
Digital Banks
These banks operate exclusively online, providing a full spectrum of banking services, including loans, with a digital-first approach.
- Up Bank: Popular for its user-friendly app, robust savings features, and home loan options for digital-first customers.
Non-Bank Lenders
Operating without a traditional banking licence, these lenders focus on specialised loan products.
- Firstmac – Provides home and investment loan options at competitive rates.
- La Trobe Financial – Specialises in tailored lending solutions, including home loans designed for those with unique financial circumstances.
- Pepper Money – Recognised for its flexible lending options especially suited for borrowers with complex credit backgrounds.
- RedZed – Focuses on financing options for self-employed individuals and others with distinctive financial profiles.
Lenders’ Interest Rates
Housing and Business Rates (September 2024)
Disclaimer: Please note that Q Financial does not offer these rates, and they are subject to change.
| Loan purpose | Outstanding loans% per annum | New loans% per annum |
| Housing (Table F6) | ||
| Owner-occupier | 6.08 | 6.26 |
| – Principal-and-interest | 6.04 | 6.19 |
| – Interest-only | 7.00 | 6.97 |
| Investment | 6.44 | 6.49 |
| – Principal-and-interest | 6.38 | 6.41 |
| – Interest-only | 6.61 | 6.61 |
| Business (Table F7) | ||
| Small business | 7.42 | 7.25 |
| Medium business | 6.28 | 6.21 |
| Large business | 5.81 | 5.57 |
| a) Includes loans at variable and fixed interest ratesSources: APRA; RBA | ||
Latest News
9News: No relief for prospective first-home buyers as regulator keeps buffer rate at 3 per cent
- The Australian Prudential Regulation Authority (APRA) has chosen to retain the mortgage serviceability buffer at 3%, despite calls to relax this requirement.
- Groups such as the Australian Banking Association, NAB, ANZ, and several political figures argue that the buffer makes it harder for first-home buyers to access the property market.
- APRA defends its position, pointing to economic risks including high levels of household debt, a weakening job market, and uncertainties in the global economic environment.
- APRA Chair John Lonsdale highlighted that rising non-performing loans and susceptibility to economic shocks are key concerns influencing the decision.
- The buffer is designed to ensure borrowers can manage repayments in the event of a 3% rise in interest rates, though critics argue it is too restrictive considering the current cash rate of 4.35%.
- Advocates for change note that the buffer started at 2% in 2014 and has been gradually raised, reaching its current 3% level by 2021.
- The decision reflects the broader conflict between safeguarding financial stability and improving housing affordability for prospective first-home buyers.
- The annual inflation rate in Australia held steady at 2.1% in October, marking its lowest point since July 2021, as reported by the Australian Bureau of Statistics (ABS).
- Higher costs for food, alcohol, and recreational activities were balanced by reduced petrol prices and government-subsidised electricity bills, which helped stabilise inflation overall.
- The “trimmed mean” inflation rate, closely watched by the Reserve Bank of Australia (RBA), rose slightly to 3.5%, excluding the downward effects of falling fuel prices and electricity subsidies.
- Electricity bills for households fell by over 35% year-on-year due to federal and state government rebates, while the cost of fruits and vegetables increased by 8.5% as supplies of items like avocados, berries, cucumbers, and broccoli dwindled.
- Experts anticipate that the RBA will keep the cash rate steady at 4.35% until at least mid-2025, awaiting clear signs that trimmed mean inflation will stabilise within the 2-3% target range.
- While most analysts expect the first interest rate cut to happen in May 2025, JP Morgan predicts it could come earlier, suggesting a 25 basis point reduction as early as February if price pressures continue to ease.
- The ABS recently acknowledged errors in calculating childcare inflation, leading to corrections in the data presented for October.
- This situation reflects the delicate balance Australia faces in managing inflation, maintaining economic stability, and determining the appropriate timing for interest rate adjustments.
- Australia’s major banks — CBA, Westpac, NAB, and ANZ — are at odds over when the Reserve Bank of Australia (RBA) might begin cutting interest rates in 2025.
- While all four initially anticipated a February 2025 rate reduction, Westpac and NAB have revised their projections, now expecting no action until May due to the RBA’s cautious stance.
- Both CBA and ANZ are holding on to their February 2025 forecast, though CBA’s Gareth Aird warns this could change if the RBA decides to wait for stronger evidence of sustained inflation improvements.
- Westpac economist Luci Ellis argues that the RBA’s current position is overly cautious, suggesting back-to-back 0.25% rate cuts in May and July, in line with strategies adopted by international peers.
- Inflation data for October revealed a drop to 2.1%, marking the first time in 3.5 years that it has fallen within the RBA’s target range, though the IMF projects it could climb to 3.6% by late 2025.
- These divergent forecasts from the big four banks reflect the uncertainty surrounding the RBA’s future monetary policy, shaped by global economic challenges and shifting inflation patterns.
FAQs on Home Loan Interest Rates
How does the RBA’s cash rate impact home loan interest rates?
The cash rate set by the Reserve Bank of Australia (RBA) serves as lenders’ benchmark in determining home loan interest rates. When the cash rate is high, mortgage interest rates tend to increase, which can make repayments more expensive. On the other hand, a low cash rate usually prompts lenders to reduce mortgage rates, making borrowing more affordable. However, additional factors, such as funding costs and competition, also play a role, meaning the cash rate isn’t the only factor affecting your home loan rate.
What is the current interest rate for home loans?
Home loan interest rates in Australia vary between lenders and are largely affected by the RBA’s cash rate, which stands at 4.35% as of November 2024. Currently, variable interest rates for owner-occupiers generally fall between 6% and 7%. Fixed rates vary depending on the term length, often slightly higher for longer terms. For the most accurate rate for your needs, check with your lender or explore rate comparisons online, as these sources provide up-to-date information on market fluctuations.
Should I select a fixed or variable interest rate?
Choosing between a fixed or variable interest rate will depend on your financial situation and goals. A fixed rate secures your interest for a specific term, ensuring steady monthly payments, which can be useful if you anticipate a rate rise. In contrast, a variable rate adjusts with the cash rate, potentially lowering costs when rates are down but raising payments if they increase. To balance both options, many borrowers prefer a split loan, where part of the loan has a fixed rate and the rest is variable. It’s advisable to consult a mortgage broker for personalised guidance and a strategy suited to your needs.
What is a good interest rate on a home loan?
A “good” interest rate on a home loan is influenced by the current market and the type of loan you’re interested in, whether fixed or variable. Generally, a competitive rate sits below the national average, which can fluctuate in line with the RBA’s cash rate. Currently, variable rates for owner-occupiers hover around 6-7%, though your actual rate could differ based on factors like your loan type, credit score, and deposit size. By comparing lender rates and checking if they align with your financial goals, you can determine the rate that best suits your needs.
What can I do to lower my home loan interest rate?
To reduce your interest rate, you might consider refinancing your home loan, particularly if current rates are more favourable than when you first obtained your loan. Increasing your deposit or improving your credit score may also help you qualify for a lower rate. Additionally, comparing rates from various lenders, considering features like offset accounts, or opting for a shorter loan term can all contribute to reducing the total interest paid on your loan over time.
