Repayment Examples and Checklists
Home loan rate rise stress test: your repayment at +1, +2 and +3 points
How much Australian home loan repayments rise when rates go up, how RBA cash rate changes flow through to your loan, and a budget stress test you can run before you borrow or fix.
To stress test your home loan, recalculate the repayment at rates 1, 2 and 3 percentage points above your current rate and check whether your budget still works at each level. On an illustrative $600,000 loan over 30 years at 6.00%, repayments of $3,597.30 a month rise to about $3,992 at 7%, $4,403 at 8% and $4,828 at 9%. The 9% line matches the 3-point buffer APRA expects banks to use when approving loans, but approval only means the lender thinks you could cope; it is your budget that has to absorb the rise.
This guide is part of how to calculate home loan repayments. Rates are illustrative, not forecasts.
Repayments at higher rates
30-year loans, principal and interest, rise applied at the start of the loan:
| Loan | 6.00% | 7.00% | 8.00% | 9.00% |
|---|---|---|---|---|
| $400,000 | $2,398.20 | $2,661.21 | $2,935.06 | $3,218.49 |
| $600,000 | $3,597.30 | $3,991.81 | $4,402.59 | $4,827.74 |
| $800,000 | $4,796.40 | $5,322.42 | $5,870.12 | $6,436.98 |
On the $600,000 loan:
- +1 point: about $395 a month more, $4,734 a year
- +2 points: about $805 a month more, $9,664 a year
- +3 points: about $1,230 a month more, $14,765 a year
A useful shortcut: on a 30-year loan around 6%, each 0.25 point rise adds about $16 a month per $100,000 borrowed, or about $97 on $600,000.
If the rise comes later in the loan
Rates rarely jump all at once on day one. If the rise comes after three years, you owe less, and the lender recalculates over the remaining 27 years. On the $600,000 example, the balance after three years is about $576,504:
- At 7%: about $3,965 a month
- At 8%: about $4,348 a month
These are only slightly lower than the day-one figures, because little principal is repaid in the first years.
How cash rate changes reach your loan
- The RBA's Monetary Policy Board announces its cash rate decision after each of its eight meetings a year.
- Lenders decide whether and how much to change their variable rates. Many announce within days, but they are not obliged to pass on the whole change, or to match the timing.
- The new rate usually takes effect a week or more after the lender's announcement. The lender must notify you of the change.
- Your repayment is recalculated, sometimes from your next repayment, sometimes after a notice period. Some lenders keep your repayment unchanged when rates fall unless you ask.
- Fixed rate loans do not change until the fixed term ends, which is when the shock arrives for many borrowers.
Run the budget test
Fill in your own figures:
| Line | Now | At +2 points |
|---|---|---|
| Take-home pay (all incomes) | ||
| Home loan repayment | ||
| Strata, council rates, building insurance | ||
| Groceries, transport, utilities | ||
| Childcare, school, health | ||
| Other debts | ||
| Savings and buffer | ||
| Surplus (pay minus everything) |
If the surplus turns negative at +2 points, you have three practical levers before you borrow: a smaller loan, a longer savings buffer, or fixing part of the loan. See fixed vs variable vs split.
What different choices do at +2 points
Same $600,000 loan, variable rate rising from 6.00% to 8.00% early in the loan. Illustrative figures:
| Choice made before the rise | Monthly repayment at 8% | Compared with doing nothing |
|---|---|---|
| Nothing: all variable | $4,402.59 | - |
| Half fixed at 5.79% for three years | $3,959.64 | $442.95 lower while the fix lasts |
| $30,000 kept in an offset | $4,402.59 | Repayment unchanged, but about $200 a month less interest charged, so the loan shrinks faster |
| $9,700 cash buffer set aside | $4,402.59 | Covers about 12 months of the increase |
Fixing protects the repayment only until the fixed term ends; an offset and a buffer protect your cash flow without break costs. Many households combine a partial fix with a buffer.
How big a buffer to hold
A simple target is enough cash to cover the +2 point increase for a year. On the $600,000 example that is about $9,700. Keep it in an offset account, where it still saves interest; see offset account vs redraw. Being ahead on repayments by a similar amount also gives you room, although redraw access can be restricted.
Warning signs to act on early
- Using a credit card or Buy Now Pay Later to cover groceries or bills
- Skipping insurance or medical costs to make the repayment
- Your offset or savings falling month after month
- A fixed rate expiring within six months at a much lower rate than current variable rates
If any of these apply, ask your lender for a rate review and, if needed, a hardship arrangement before you miss a payment. See mortgage hardship and AFCA complaints. The National Debt Helpline (1800 007 007) offers free financial counselling.
Frequently asked questions
What counts as mortgage stress?
There is no single legal definition. A common rule of thumb in research is repayments above about 30% of gross household income, but your actual surplus after all expenses is a better test.
Will extending my loan term reduce the repayment rise?
Yes, but it increases total interest. It can be a useful hardship measure; as a permanent fix it is expensive. See the term reset example in the refinance worked example.
Should I fix to avoid rate rises?
Fixing gives certainty for the fixed period only, and you may pay break costs if circumstances change. Fixed rates already reflect expected rate rises.
Where can I see the history of the cash rate?
The Reserve Bank of Australia publishes cash rate decisions and historical data on its website.
Sources
- Reserve Bank of Australia — cash rate decisions and meeting schedule
- APRA — serviceability buffer
- National Debt Helpline — free financial counselling
- ASIC Moneysmart — budgeting and mortgage stress
