After every RBA rate rise, we get the same question: "When will my repayments go up?" The answer isn't always the same day, and understanding the timing can help you plan.
Two different dates
There are two separate changes:
- Your interest rate changes. Lenders usually announce within a day or two of the RBA decision, with the new rate effective about a week or two later.
- Your repayment amount changes. This can take longer, because lenders must give you notice before increasing your required repayment.
The notice rules
Under the National Credit Code, lenders must notify you of changes to your interest rate no later than the day the change takes effect. For changes to your repayment amount, they must give at least 20 days' written notice.
Canstar has noted that, with notice periods and letter timing, the higher repayment can take a couple of months to hit some borrowers' accounts after an RBA decision.
What happens in the meantime?
Your interest rate goes up from the effective date, so interest accrues at the higher rate straight away. If your repayment hasn't changed yet, you're paying slightly less than the new required amount for a short period. The difference is added to your balance, and your next repayment calculation reflects it.
It's not a big amount, but it's better to start paying the higher amount as soon as the rate changes.
How much will it rise?
A 0.25% rise on a 30-year principal and interest loan adds about:
- $66 a month on $400,000
- $98 a month on $600,000
- $130 a month on $800,000
Interest-only loans rise by a bit more relative to the repayment, because the whole repayment is interest.
Get ahead of it
- Increase your repayment yourself as soon as your lender announces the new rate
- Check your direct debit covers the new amount
- Move spare cash into your offset to reduce interest
- Budget for the next possible rise by setting aside the extra amount now
Fixed rates
If your loan is fixed, your rate and repayment don't change until the fixed period ends. Plan ahead for when it does. See your fixed rate is ending.
Split loans
Only the variable portion changes. Your fixed portion stays the same until its term ends.
Lenders don't always match the RBA
Most lenders pass on the full RBA change to variable borrowers, but they're not required to, and some move by different amounts or on different timelines. This is one reason rate reviews matter.
Frequently asked questions
How will I be notified?
Usually by email, letter or in-app notification. Lenders can also advertise rate changes in newspapers, but repayment changes need direct notice.
Can I ask my lender not to increase my repayment?
If you're struggling, you can request a hardship variation. Otherwise, the required repayment must be met.
Do offset balances change the repayment?
Usually not. An offset reduces interest charged, which means more of your repayment goes to principal, but your required repayment amount typically stays the same.
Want to know how much the latest rise adds to your repayment? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654 or use our rate rise calculator.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
