The Reserve Bank’s third consecutive 0.25 percentage point cash rate rise, taking the cash rate to 4.35%, is flowing straight through to variable mortgage rates and household budgets.
Canstar estimates the latest move adds about $91 a month to repayments on a $600,000 loan, or $272 across the three 2026 hikes – roughly $3,265 extra over the next year if rates now stay on hold.
Australia’s big four banks have confirmed they will pass on the 0.25 percentage point increase in full to variable home loan customers from 15 May, with Westpac set to retain the sharpest big-bank rate at 5.99% for owner-occupiers paying principal and interest.
Major lenders outside the big four, including Macquarie Bank and Teachers Mutual Bank, have also unveiled 0.25 percentage point hikes to variable home loan rates, with their changes taking effect later in May and early June.
“The RBA has pulled the trigger on yet another rate hike, and as expected, Australia’s big banks are passing it on to variable borrowers in full,” Canstar’s Sally Tindall said.
Support, hardship, and the risk of mortgage prison
As higher mortgage rates filter through household budgets, banks are pairing these increases with a renewed emphasis on early engagement and hardship support.
“We recognise that many Australian households are feeling pressure from the cost of living amid current global uncertainty,” ANZ group executive Australia retail, Pedro Rodeia, said.
These measures are crucial for borrowers at risk of “mortgage prison” – effectively locked in with their current lender if lower property values or tighter serviceability tests prevent a refinance to a sharper rate.
Despite rising mortgage rates, competition for quality borrowers remains intense, with Canstar’s analysis suggesting that once the latest hikes are fully passed through, a competitive owner-occupier variable rate will be around the high-5% mark, with some lenders closer to 5.75%. A typical owner-occupier with a $600,000 loan who has not renegotiated for several years could be paying close to 7.0%, while sharper deals sit nearer 6%.
Canstar’s modelling indicates that shifting down by about one percentage point could save more than $11,000 in interest over two years, even after allowing for switching costs.
“Hardship options can provide breathing room, but they’re not a free pass – they often come with a longer-term cost that borrowers need to weigh up carefully,” Tindall said.
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