Interest Rates Are Rising: 7 Things Australian Homeowners Can Do to Manage Their Mortgage
Australian homeowners are once again facing higher mortgage repayments as interest rates continue to put pressure on household budgets.
On 3 November 2026, the Reserve Bank of Australia (RBA) increased the official cash rate by another 0.25 percentage points to 4.85%. This was the fifth increase in 2026, adding to the financial pressure already being felt by many households.
While borrowers cannot control interest rate decisions, there are steps they can take to better manage their home loans, potentially reduce their interest costs and prepare for further changes.
If you have a mortgage, now is a good time to look beyond your monthly repayment and consider whether your current loan is still working in your favour.
Here are seven things Australian homeowners can do to manage their mortgage in a higher interest rate environment.
1. Find out what the latest rate increases are actually costing you
It is easy to hear about an interest rate increase and underestimate what it means for your household budget.
Even a relatively small change in your interest rate can make a noticeable difference when you have a substantial mortgage.
For example, consider a homeowner with a $600,000 principal and interest home loan and 25 years remaining.
If their interest rate increased from 6.00% to 6.25%, their approximate monthly repayment would increase from $3,866 to $3,958.
That's an additional $92 per month or approximately $1,104 per year.
The impact will vary depending on your outstanding loan balance, interest rate and remaining loan term.
It is worth reviewing your repayments whenever your lender changes your interest rate. Understanding the additional cost can help you adjust your household budget and identify whether there are other areas of your finances that need attention.
2. Don't assume your existing bank is giving you its best deal
Many homeowners have been with the same bank for years. While loyalty can have its benefits, it does not necessarily mean you are receiving the most competitive interest rate available.
Banks regularly adjust their lending rates and pricing and the rate offered to a new customer may differ from what an existing customer is paying.
Rather than simply accepting an interest rate increase, contact your lender and ask them to review your current pricing.
Before doing so, it can be helpful to understand what other lenders are offering for a comparable loan. This gives you a better idea of whether your current rate is competitive and provides a basis for a discussion with your bank.
You may be surprised by what your existing lender is prepared to offer when you ask for a review.
However, don't assume that every advertised rate will be available to you. Lenders have different eligibility requirements and the rate offered will depend on factors such as your loan-to-value ratio, loan purpose and product selection.
3. Understand the difference between a lower interest rate and a better home loan
A lower interest rate is attractive, particularly when repayments are increasing. However, the cheapest advertised rate does not automatically mean the loan is the best option.
Before making a decision, consider the overall cost and features of the loan.
Some things worth checking include:
Annual fees: Does the loan have an ongoing package or account fee?
Offset account: Does it offer a full offset account and are there additional costs?
Redraw facility: Can you access additional repayments when needed and are there any restrictions?
Loan flexibility: Does the loan allow you to make additional repayments or change repayment arrangements?
Interest rate: Is the advertised rate available for your circumstances and loan requirements?
For example, a loan with a slightly higher interest rate may still be more suitable if it provides an offset account that you regularly use.
The important thing is to compare the overall value of the loan rather than making a decision based solely on the headline interest rate.
4. Make better use of savings you already have
If you have savings sitting in a transaction or savings account, it may be worth considering whether those funds could be working harder towards reducing your home loan interest.
An offset account can help achieve this.
An offset account is linked to an eligible home loan and the balance is deducted from the loan balance when calculating the interest charged.
For example, if you have a $600,000 home loan and $30,000 sitting in a full offset account, you would generally only be charged interest on $570,000.
The benefit will depend on how much you keep in the account and how long the funds remain there.
Another option is making additional repayments towards your mortgage, where your loan allows it. This can reduce the outstanding loan balance and the interest charged over time.
However, there is an important difference between the two approaches. Money in an offset account generally remains accessible, whereas additional repayments may be subject to redraw conditions.
It is also important to retain sufficient savings for emergencies and unexpected expenses rather than putting every available dollar into your mortgage.
5. Be careful about extending your loan term to reduce repayments
When household budgets become tighter, extending the remaining term of a home loan can appear attractive because it may reduce the required monthly repayment.
However, this decision can come at a significant long-term cost.
Consider a homeowner with a $500,000 mortgage at an illustrative interest rate of 6.00%.
If they have 20 years remaining on their loan, their approximate monthly principal and interest repayment would be $3,582.
If the loan term were extended back to 30 years, the monthly repayment would fall to approximately $2,998.
That is a reduction of around $584 per month.
While the lower repayment may provide some short-term breathing room, the borrower would potentially pay considerably more interest over the life of the loan because the debt is being repaid over a longer period.
Extending a loan term is not necessarily the wrong decision in every circumstance, particularly where a borrower is experiencing financial pressure. However, it is important to understand the long-term implications before proceeding.
A lower monthly repayment does not always mean a cheaper home loan.
6. Don't wait until you need to refinance to find out whether you qualify
Refinancing can be an option for homeowners looking to reduce their interest rate or improve their loan features. However, switching lenders is not always as straightforward as it may seem.
When you apply for a new home loan, the lender will generally reassess your financial position.
This can include reviewing:
Your current income and employment.
Your living expenses and household commitments.
Existing loans, credit cards and other liabilities.
Your outstanding mortgage balance.
The current value of your property.
Your ability to meet the proposed repayments.
A borrower who qualified for their original mortgage several years ago may not necessarily meet another lender's current assessment requirements.
Changes in income, increased living expenses, additional debts or changes in property values can all affect refinancing options.
This is why it is important to understand your position before assuming that moving to another lender will be possible.
If you are considering refinancing, compare the potential savings against the costs of switching and make sure the new loan is suitable for your circumstances.
You can read more in our article: Is It Worth Refinancing Your Home Loan? 7 Signs It Might Be Time to Review Your Mortgage.
7. If repayments are becoming difficult, act early
For some households, higher interest rates are not simply an inconvenience. They can create genuine financial difficulties, particularly when combined with rising living expenses, insurance premiums, energy bills and other household costs.
If you are finding it increasingly difficult to meet your mortgage repayments, don't ignore the situation or wait until you miss a payment.
Contact your lender as early as possible and explain your circumstances.
Australian lenders have financial hardship processes and may be able to discuss options depending on your situation. These could include temporarily reducing repayments, changing repayment arrangements or agreeing to a short-term payment arrangement.
The appropriate solution will depend on your financial circumstances and the lender's assessment.
It is also important to understand that refinancing is not necessarily the answer when you are already experiencing financial difficulty. A new lender will still need to assess your ability to repay the loan and approval is not guaranteed.
The earlier you seek assistance, the more opportunity you may have to understand the available options and work towards a manageable solution.
You can also find further guidance through the Australian Government's Moneysmart website.
Don't wait for interest rates to fall before reviewing your home loan
It is difficult to predict exactly where interest rates will go over the coming months. While borrowers may hope for rate reductions, making decisions based on predictions about future RBA announcements can be risky.
Instead, focus on what you can control.
Review your existing interest rate, understand your loan features, make informed decisions about your savings and ensure your mortgage remains suitable for your financial circumstances.
Even if you are comfortable meeting your current repayments, there may be opportunities to improve your position.
At Mortgage Compare Plus, we review our customers' home loans annually to check whether their existing interest rate remains competitive and whether their loan continues to suit their needs.
We approach the existing lender for a better rate and compare the loan against other options available in the market.
The aim isn't to refinance customers unnecessarily. It is to make sure their home loan remains competitive and appropriate for their circumstances.
If you haven't reviewed your home loan recently, now may be a good time to find out whether you could be in a better position.
Contact Mortgage Compare Plus to discuss your existing home loan and the options available to you.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.
