Time to read : 3 Minutes

Forget Black Friday, it's a Black Tuesday for mortgage holders as the Reserve Bank of Australia has opted to increase the cash rate by 0.25% in November.

• The raise - which was predicted by Compare Club's mortgage brokers in advance of the the RBA's announcement - takes the cash rate from a low of 0.1% in May 2022 to 4.35% today.

• It's estimated this will add another $92 to monthly mortgage payments of a $600,000 principal and interest mortgage.

In addition, Expert Analysis's survey of Compare Club's brokers has highlighted growing concerns among the country’s mortgage brokers about the potential impact of an interest rate increase. 

Key survey findings:

• First home buyers at risk: 70% of the brokers believe a further rate rise would have a significant impact on first home buyers, potentially making homeownership even more challenging for many Australians and for some completely out of reach.

• Refinancing enquiries up, but limited action: There’s been a substantial increase in refinancing enquiries

  • Yes, but… most of those enquiries are not translating into actual loan transfers. 

• The brokers cited that the difference in current interest rates - once refinancing costs are considered - needs to be more significant than the homeowner’s existing rate to motivate borrowers to switch lenders.

• Lack of interest in fixed rate loans: A surprising 80% of mortgage brokers reported that they have not observed a surge in interest for fixed-rate loans, despite the recent rate hikes. 

  • Some brokers noted that fixed rates are still generally higher than variable rates

  • Many borrowers are holding out in hopes of rate reductions by the end of next year or in early to mid-2024.

Kate Browne, our Head of Research at Compare Club, told me: "There is no doubt that this rate rise is really going to hurt. Our panel of mortgage brokers says that many customers are telling them they cannot survive many more rate rises.

"While it's always a good idea to do a health check on your current mortgage and see if you can refinance, we are seeing a lot of people enquiring but not actually moving lenders as it's not worth it with high-interest rates on offer across the board."

"This is going to be a very tough time for mortgage holders and first home buyers as there appears to be no immediate relief in sight in rising interest rates. 

“Many Australians are frustrated as so many things affecting inflation are out of their hands; they have tightened their belts and are cutting back on spending, but with rising costs in fuel, food, and rent, they're running out of options."

But it's not totally hopeless. Here's a few tips from Compare Club's expert brokers.

What actions can mortgage holders take right now?

• Ask your current lender for a better rate - if you haven’t done this in over a year check in to see if there are some better options available.

• Contact a mortgage broker so they can give your current loan a health check and advise if there is a better option worth switching to.

• Consider your loan options - can you fix part of your loan? Set up an offset account to reduce the amount of interest paid.

• Can you consolidate other debts? If you've got a car loan or high credit card debt, you may be able to still save on your overall monthly repayments by bundling them into your home loan?

• If it's really not worth switching home loans, see if there's other areas you can save. Plenty of energy retailers have some seriously strong offers in market right now, for example.

• If you are in serious financial trouble contact your lender as soon as possible to let them know - most lenders have hardships programs and can offer suspending payments or setting up payment plans. The sooner this is done the better.