By George Rentzepis – Director of Lending, Navigate Advisory
| Quick Summary: The RBA raised the cash rate by 0.25% to 3.85% – the first increase since November 2023. With inflation proving stubbornly persistent and three of the four major banks tipping another rise in May, we’re looking at a ‘higher for longer’ rate environment. Now is the time to understand what this means for your mortgage, your investments, and your retirement plans – and take action before the next move. |
After a brutal run of rate rises through 2022 and 2023, we finally got some breathing room with three cuts in 2025. But just as people started to relax, inflation came back with a vengeance. The December quarter figures showed underlying inflation at 3.4% – well above the RBA’s comfort zone.
So here we are. The cash rate is sitting at 3.85%, all four major banks have passed on the full 0.25% increase to variable borrowers, and three of the four big banks are forecasting another rise in May.
How The Rate Rise Impacts Your Loan Repayment
Assuming your lender passed on the full 0.25% increase, here’s what the rate rise actually looks like depending on the size of your loan.
| Loan Amount | Monthly Increase | Annual Increase |
| $500,000 | +$77 | +$924 |
| $750,000 | +$115 | +$1,380 |
| $1,000,000 | +$154 | +$1,848 |
| $1,500,000 | +$231 | +$2,772 |
Assumptions: 25 years remaining on a principal and interest loan; average owner-occupier variable rate of approximately 5.5%; full 0.25% increase passed on by your lender.
Take that $1 million mortgage – a very common figure for anyone who’s bought in Sydney’s inner west, eastern suburbs, or northern beaches in recent years. An extra $154 a month might not sound catastrophic on its own. But if a second hike lands in May (which CBA, NAB and Westpac all expect), you’re suddenly looking at $308 a month more than you were paying at the start of the year.
What This Means for Homeowners
If you’re on a variable rate: Your repayments have already increased. Higher repayments mean less cash flow and less of your money going toward paying down your loan balance.
If you’re on a fixed rate: Your repayments haven’t changed yet. But if you locked in a rate below 3% during 2020-2021, you’ll eventually roll back to a variable rate that looks very different.
What you can do right now:
- Check your rate. If you haven’t reviewed your home loan in the last 12 months, there’s a good chance you’re paying more than you need to. Rates vary significantly between lenders, and loyalty to your current bank rarely pays off.
- Maximise your offset. Every dollar sitting in your offset account reduces the interest you’re charged. If you’ve got savings scattered across multiple accounts, consolidating into your offset could save you thousands over the life of your loan.
- Stress-test your budget. Run your numbers assuming rates go up another 0.25–0.50%. If that scenario keeps you up at night, it’s time to have a conversation with a broker about your options.
- Consider fixing a portion. A split loan – part fixed, part variable – can give you the certainty of knowing what a chunk of your repayment will be, while still benefiting from offset and extra repayments on the variable portion.
- Review your fixed rate expiry. If your fixed term is ending in the next 6 months, speak to a broker to explore your options. The difference between a sub-3% fixed rate and today’s variable rates is significant.
What This Means for Property Investors
It’s a mixed bag for property investors.
On one side, your borrowing costs have just gone up. If you’re carrying multiple investment loans – the compounding effect of 0.25% across your entire portfolio adds up fast. On a $2 million investment debt, you’re looking at an extra $308 per month.
On the other side, higher rates tend to cool buyer demand, which could mean softer prices in some pockets. For investors with capacity, that creates opportunity to buy with less competition.
The rental market is working in your favour. Rental demand remains strong and vacancy rates are low, which means rental yields are helping to offset the higher interest costs.
What investors should be thinking about:
- Review your loan structures. Are your investment loans still set up in the most tax-effective way? Are you on the right products? A 0.20–0.30% difference in rate across multiple loans translates to thousands per year.
- Watch your borrowing capacity. Lenders use higher assessment rates during rate hikes, which shrinks how much you can borrow for your next property. If you’re planning to add to your portfolio, get pre-approved sooner rather than later.
- Don’t panic-sell. Property is a long game. If your cash flow is tight, refinancing or restructuring your debt might free up breathing room without needing to offload assets.
What This Means for Retirees and Pre-Retirees
If you’re a self-funded retiree, a rate rise can actually work in your favour.
Higher rates mean better returns on term deposits and savings accounts. If you’ve got a portion of your retirement savings in cash or fixed income, you’re earning more.
Fixed-income investments, such as bonds, also become more attractive in a higher-rate environment. They start generating real income, helping balance the risk in your portfolio.
But it’s not all upside. If you’re still carrying any debt into retirement – even a small mortgage – the increased repayments eat into your income. And if you’re helping your children with property purchases (something we see a lot with Sydney families), higher rates reduce their borrowing power and may change the equation for how much support they need.
What retirees should consider:
- Review your income strategy. Higher cash rates mean you might be able to reduce portfolio risk while maintaining the income you need.
- Lock in term deposits. With further rate rises possible, now could be a good window to lock in attractive term deposit rates.
- Reassess any remaining debt. If you’re still making mortgage repayments in retirement, speak to a lending specialist about whether restructuring or paying down that debt makes sense for your situation.
What’s Next? Is Another Hike Coming in May?
The short answer: probably.
Three of the four major banks – CBA, NAB, and Westpac – are now forecasting a second 0.25% increase at the RBA’s May meeting, which would take the cash rate to 4.10%. ANZ is the only holdout, betting this will be a one-and-done situation.
The RBA itself isn’t giving much away. Governor Michele Bullock has been blunt about the situation, saying the Board is “uncomfortable with inflation at the level it is.” The RBA’s own updated forecasts have trimmed mean inflation staying above 3% through all of 2026 – well above where they want it to be.
The March meeting on the 17th is widely expected to be a hold. The real action will come after the Q1 inflation data lands in late April. If those numbers are still running hot, a May hike becomes almost certain.
Why Now Is the Time to Get Your Home Loan Reviewed
Here’s something I see every week in my work as a mortgage broker: people paying thousands more than they need to because they haven’t reviewed their home loan in years.
Think of your mortgage like a phone plan. You wouldn’t stay on a plan from 2019 without checking what else is out there. But that’s exactly what millions of Australians do with the biggest debt of their lives.
The difference between the best and worst variable rates on the market right now can be 0.50% or more. On a $1 million mortgage, that’s roughly $3,000 a year. Over five years, you’re leaving $15,000 on the table.
What most people don’t realise is that your bank’s pricing isn’t fixed. Lenders have different rates for new customers versus existing ones. The rate you were offered two years ago might be significantly higher than what someone walking in the door today gets – for the exact same product.
This is where a broker can make a real difference. We have access to dozens of lenders and hundreds of loan products. We can see exactly where your current loan sits against the market and identify whether there’s a better deal available – without you having to do the legwork.
What a Navigate Advisory loan review looks like
- We compare your current rate and features against what’s available across the market.
- We assess whether refinancing makes sense once you factor in exit fees, clawback costs, and setup charges.
- We check whether your loan structure still suits your circumstances – have your goals changed since you took out the loan?
- We do the negotiation and paperwork. If switching lenders is the right move, we handle the process from start to finish.
More than 75% of all new home loans in Australia are now arranged through mortgage brokers. There’s a reason for that. In a market where rates are rising and every dollar counts, having someone in your corner who can see the full picture is worth its weight in gold.
The Bottom Line
Rate rises are unsettling. But they don’t have to derail Your Great Life plans.
The people who come out of periods like this in the strongest position aren’t the ones who panic. They’re the ones who take a clear-eyed look at their situation, get the right advice, and make proactive decisions.
Whether you need your mortgage reviewed, your investment loan structures assessed, or you simply want to understand how the rate environment affects your financial plan – our lending team is here to help.
Book a 15-minute introductory call with our lending team: navigateadvisory.com.au/contact
Find out more about our lending services: navigateadvisory.com.au/loans-finance
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