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What happens if your interest rate goes up

Step 2

What to expect

RBA's cash rate decision each month is based on several factors, in particular inflation, employment, and consumer confidence around the country.

One key driver RBA is watching closely is inflation, or the cost of goods and services over time. Australia's inflation has been the highest it has been since the 1990s. The RBA aims to set its monetary policy to bring the inflation rate back into line over time.

You can read more RBA's statement on its website: https://www.rba.gov.au/media-releases.

At Keystart, 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.

We understand that the increases in interest rates are a significant change for many homeowners. Take a closer look at where interest rates have been over time

Effect on your minimum payment

In order for you to pay off your home loan over your loan term (for many of our customers the loan term is 30 years), you have a minimum monthly payment amount that you need to pay every month. This payment amount is based on the current interest rate.

If interest rates go up, that minimum amount goes up, if the rates go down, the minimum amount goes down. 

The minimum amount is just that – it's the minimum you'll need to pay to pay off your home loan over your remaining loan term. That doesn't mean you can't pay more than the minimum. Making payments beyond the minimum amount will help build equity and help you pay off your home loan sooner.

How much more will your repayment be?

If you currently pay more than your minimum monthly amount, it's possible that your monthly or fortnightly payment may cover your minimum monthly repayment amount increase. You can check what your minimum monthly repayment amount is in the Keystart app. This is under the My loan section.

While none of us can predict what the future holds, you can still prepare yourself for some scenarios now. You can use our repayment calculator to see what impact an increase in rates will have on your minimum payment. Enter your current loan amount and then you can enter a range of rates to see what your repayment amounts could be.

Let's look at an example:

Maria has a $340,000 loan with an interest rate of 7.85%. Her minimum repayment is $2,459 per month, or $1,229.50 per fortnight. The interest rate increases by 0.50 percentage points, changing her interest rate to 8.35%. Her new minimum repayment is $2,578 per month, or $1,289 per fortnight. This is an increase of $119 per month, or $59.50 per fortnight.

*Based on Keystart variable interest rate of 7.85% effective 24 November 2023.


How you can prepare

There are some steps you can take to help you get ready for an interest rate increase. Our guide gives you some tips on what small actions may make a big impact.

How will you know if the rate changes?

When our interest rate changes, we get in touch with you before the effective date to let you know what your new minimum payment amount will be.

Transitional lender

Did you know that we're a transitional lender? This means that we encourage our customers to refinance to another lender when they are ready to do so. Refinancing to another lender may mean you can take advantage of lower interest rates. Find out more about building equity and refinancing.

This post is general information only and does not take into account your objectives, financial situation or needs. You should consider whether the information is suitable for you and your personal circumstances.  Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. Any examples given in this post are provided for illustrative purposes.


Moving through the Guide

Find your financial feet with our Financial Wellbeing Guide to Interest Rates. We've compiled some useful tips and resources on interest rates and your home loan. Read the next steps below - or head back to the guide.

Looking for more? We're here to help.

  • Financial support

    We're here to support you. Get in touch if you need us.

    Financial support
  • Transitional lender

    Ready to move away from Keystart? Here are some tips on what to consider.

    Transitional lender
  • Repayment calculator

    Find out how much your home loan repayments could be and how much you could save if you make extra repayments. Repayment calculator