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How interest rates work

What are interest rates?

Interest is the cost of borrowing money. For a loan, this cost is presented as a percentage of the total amount you borrow. Interest rates can be fixed or variable.

All Keystart loans have a variable interest rate, this means that the interest rate may go up and down over time.

Rates will fluctuate over the life of your loan

Over the course of your Keystart home loan, interest rates are likely to change several times. Keystart interest rates are variable, this means your interest rate may increase or decrease.

When interest rates decrease, your minimum monthly repayment may also go down. Similarly, when interest rates increase, it means your minimum monthly repayments may go up in line with the rise in interest. It's a good idea to plan ahead for this.

How are interest rates calculated? 

The process starts with the Reserve Bank of Australia (RBA). The RBA determines the national cash rate. This is the interest rate it charges commercial banks for loans. The cash rate is different from lenders' home loan or personal loan rates. Lenders consider the cash rate when setting interest rates for all financial products including savings accounts, personal loans and home loans.

The RBA's decision on the cash rate is based on a number of factors, such as employment, inflation, consumer and business confidence and the housing market around the country.  

How the RBA rates affect home loan rates

When the RBA announces a change in the cash rate, either up or down, financial institutions may decide to increase or decrease their rates too. This is not the only factor affecting rate decisions. Banks sometimes change rates at different times. They may decide not to change rates at all.

How we set our interest rates at Keystart

Given the low deposit nature of the lending we provide, Keystart has an interest rate policy that enables us to manage our lending risk responsibly whilst remaining focused on our vision of making the dream of affordable home ownership a reality for more people.

We offer home loans with lower entry costs, including a low deposit and no lender's mortgage insurance. While you might see home loans with a lower interest rate, those loans often require a much larger deposit. Read more about how to compare interest rates.

Our interest rate policy is to set the rates based on the movements of the Reserve Bank of Australia’s (RBA’s) official cash rate. 

Remember, we encourage you to transition to another lender as soon as you are able to do so. There may be lots of good reasons for this. You might be able to negotiate a lower interest rate with your new lender, or you could have your new loan packaged together with other financial services products to get a better deal.

Timing of rate changes

A change in the interest rate is influenced by movements in the RBA's cash rate. View our current interest rates. 

We'll keep you updated

If you're a Keystart customer, once a change to our interest rates has been approved, we'll be in touch.


Roisin Broderick, Content Specialist, Keystart