After over a decade of cutting the cash rate, the Reserve Bank of Australia (RBA) increased rates almost every month from April 2022 to June 2023. Homeowners and would-be borrowers may be nervously wondering how high their home loan rates will go.

The big four banks have all cast their predictions for the next few years of cash rate movements. The cash rate started at 0.10% in April 2022. For the average owner-occupier paying a variable rate, your home loan rate could reach 7.36% in 2023.

Big four bank’s cash rate forecasts

CBA: Peak of 4.35% in November 2023, then dropping to 2.85% by June 2025
Westpac: Peak of 4.35% in November 2023, then dropping to 2.85% by December 2025
NAB: Peak of 4.60% by February 2024, then dropping to 3.10% by March 2026
ANZ: Peak of 4.35% in November 2023, then dropping to 3.35% by June 2025

Keep in mind that these are just predictions, and that the big banks are subject to change these forecasts.

The RBA kept the cash rate on hold in its final meeting for 2023 in December. Homeowners are likely breathing a sigh of relief, especially as the next meeting will not be until February 2024. Unfortunately for Australians with a mortgage, one of the Big Four Banks, NAB, is still predicting that another cash rate hike is likely. The bank has tipped that the cash rate will peak at 4.60% in February.

Homeowners may want to keep in mind that the big banks are still predicting rates will fall again in late 2024. Only time will tell if borrowers will see some relief to their mortgage repayments next year.

How high could your mortgage interest rate rise?

Prior to the first cash rate hike, the average existing owner-occupier variable home loan rate in April 2022 was 2.86%, according to the Reserve Bank of Australia.

This is what average home loan interest rates may look like if the big four bank predictions are accurate:

Average interest rates based on big four bank cash rate predictions

Starting Month	Average rates based on CBA forecast	Average rates based on Westpac forecast	Average rates based on NAB forecast	Average rates based on ANZ forecast
Apr-22	2.86%	2.86%	2.86%	2.86%
May-22	3.11%	3.11%	3.11%	3.11%
Jun-22	3.61%	3.61%	3.61%	3.61%
Jul-22	4.11%	4.11%	4.11%	4.11%
Aug-22	4.61%	4.61%	4.61%	4.61%
Sep-22	5.11%	5.11%	5.11%	5.11%
Oct-22	5.36%	5.36%	5.36%	5.36%
Nov-22	5.61%	5.61%	5.61%	5.61%
Dec-22	5.86%	5.86%	5.86%	5.86%
Feb-23	6.11%	6.11%	6.11%	6.11%
Mar-23	6.36%	6.36%	6.36%	6.36%
Apr-23	-	-	-	-
May-23	6.61%	6.61%	6.61%	6.61%
Jun-23	6.86%	6.86%	6.86%	6.86%
Jul-23	-	-	-	-
Aug-23	-	-	-	-
Sep-23	-	-	-	-
Nov-23	7.11%	7.11%	7.11%	7.11%
Feb-24	-	-	7.36%	-
Aug-24	-	-	-	-
Sep-24	6.86%	6.86%	-	-
Nov-24	6.61%	-	6.86%	-
Dec-24	6.36%	6.61%	-	6.86%
Feb-25	6.11%	-	6.61%	-
Mar-25	5.86%	6.36%	-	6.61%
May-25	5.61%	-	6.36%	-
Jun-25	-	6.11%	-	6.36%
Aug-25	-	-	6.11%	-
Sep-25	-	5.86%	-	-
Nov-25	-	-	5.86%	-
Dec-25	-	5.61%	-	-
Feb-26	-	-	5.61%	-
CASH RATE PEAK	4.35%	4.35%	4.60%	4.35%

Source: RateCity.com.au, Big bank rate hike forecasts as of 04/12/2023.

If you are currently on a variable rate home loan, and your lender passes on these rate hikes in full, you may find your home loan repayments become significantly more expensive. If you are still on a fixed rate home loan from the low-rate era, when your loan term ends you may be reverted to a much higher interest rate.

How high could your mortgage repayments rise?

RateCity has crunched the numbers on how these rate hikes could impact repayments on a 25-year, $500,000 home loan.

Assuming that your lender passes on every single cash rate hike in full to your home loan as per NAB's predictions, and that you are currently repaying a variable rate loan, you may find that your monthly repayments are $1,287 more expensive in 2023 compared to April 2022.

How much more you may pay on your home loan in 2023

Home loan	Monthly repayments
Average rate in April 2022 – 2.86%	$2,335
Forecast average rate in 2023 – 7.36%	$3,622
Difference	$1,287

Source: RBA average owner-occupier variable rate for existing customers, April 2022. RateCity.com.au. Note: Based on a 25-year, $500k home loan, comparing repayments with RBA average rate in April of 2.86% versus a 7.36% interest rate from NAB's predicted cash rate peak of 4.60% in 2024. Does not factor in fees.

This is a significant amount for homeowners to find within their already strained household budgets - the equivalent of buying a new iPhone every month. Homeowners may want to take action as soon as possible to accommodate higher repayments, including:

Making extra repayments to chip away at your loan principal;
Paying into an offset account or redraw facility to help reduce your interest charges; and
Refinancing to a lower-rate lender if it suits your financial needs and budget.

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