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5 ways to protect your home loan from interest rate increases

In the time of rising interest rates, learn what moves you can make to keep your repayments manageable

January 23, 2023 • 7 min read

Young girl poking eyes out from behind a cardboard box

As a homeowner, one important part of financial planning is considering how to reduce your home loan interest rate. This is also an important aspect of protecting your finances and exploring ways to protect yourself from potential rate hikes.

Fortunately, there are several strategies that homeowners can use to safeguard their home loans against rising rates. In this article, we'll discuss five of these tactics so that you can make sure you safeguard your money against increasing home loan rates and ensure your lifestyle remains affordable even if rates go up.

What is a good interest rate for a home loan?

Before we delve into the strategies, you might wonder, “what is a good interest rate for a home loan?”. The answer is that it depends on your financial situation and the current market conditions. Currently, the average variable interest rate for an owner-occupied home loan is 6.32%.

Between RBA rate hikes and the rising cost of living, these days, a 'good' interest rate is anything around or below the 6% mark. This takes into account the fluctuations that are typically observed in the property and funding cycles during the lifespan of the home loan. To learn more about home loans and what they entail, check out our comprehensive home loan guide.

Now that you have an idea of what’s considered a “good” interest rate, let’s go over some strategies for ensuring your home loan interest rate (or your living expenses) stays as low as possible.

5 ways to protect your home loan from interest rate increases

1. Speak to an expert

It would be beneficial to go back to your lender to see if there is any room to restructure or refinance your home loan. That said, we always encourage staying up-to-date by subscribing to finance news feeds and following financial expert commentary online.

This is also a good time to start calculating the cost of an increased home loan. For example, how much would your repayments be in a worst-case scenario and what expenses can you review to stay on track?

By setting reminders and keeping track of interest rate comparisons, you’ll learn how much more you'll end up paying and whether or not this still fits into your overall budget plan. If you find that the added costs might put a dent in your long-term goals, it might be time to explore your options.

2. Consider refinancing your home loan

One of the key strategies you can employ to reduce your home loan interest rates is refinancing. Refinancing refers to the process of replacing one loan with another. By refinancing, you can potentially lower your monthly payments and reduce the total amount of interest that you'll pay over the life of the loan.

It’s important to keep in mind though that chronic refinancing is not a good option either since the fees can add up and may make the saving benefits negligible. Other considerations you need to make include:

  • Taking note of all the factors that affect your loan payments

It’s not always about the rate, though we know cumulatively, you can save thousands on interest payments over the life of your loan. A 6% interest rate for a 30-year loan is generally favourable but you might still end up paying more depending on the fees and external market conditions.

  • Knowing the fees and features

As much as possible, find a fee-free lender. It’s important to check the fine print for application, annual and ongoing fees — accumulatively, they can add up and erode your savings endeavours.

The same goes for loan features. Oftentimes, loan features are sometimes worth their weight in gold, depending on your personal requirements, and can give you the ability to save much more in the long run.

And when it comes to refinancing home loans, Tiimely Home offers some of the best with low rates, fast online approvals, and stellar customer service. Check out our refinancing calculator to see how much you’ll save!

3. Switch to a fixed interest rate, or a split rate loan

Fixed interest rates are a great way to protect your home loan from rising interest rates. This is because the rate remains unchanged, no matter how much the market fluctuates during the fixed period. Fixed interest rates can be a great choice if you plan on keeping your home for several years and want to avoid any surprises in terms of loan costs. It can help with budgeting as you’ll know how much you owe on your home loan each month.

On the downside, it may limit your ability to make extra repayments, and most lenders have high break costs if you want to refinance within the fixed period.

Alternatively, you can opt for a split rate home loan. This type of loan allows you to divide your loan into multiple parts — meaning you could nominate a portion of the loan to have a fixed interest rate and the remainder could have a variable interest rate.

4. Try cutting or consolidating costs

Another option to help you manage home loan interest rate repayments is to review and cut back on other living expenses. This will free up more cash that can be put towards paying off the loan faster, and could be a way to negotiate rates and features with your lender later down the track.

Making small changes such as eating out less, shopping smarter, and turning down the thermostat all add up to big savings over time. Or you could tackle the ongoing expenses like annual insurance premiums, phone plans, credit cards and personal loans – consolidating (insurance and household expenses) or paying off liabilities and loans can be beneficial for your budgeting efforts.

5. Create and adhere to a financial plan

Finally, it’s important to create a good financial plan and stick to it. This will help you stay on top of your finances and ensure you don't miss out on any opportunities to reduce your home loan interest rate by paying off more than the required monthly payments. A financial plan can also help you identify areas where you can cut costs and save money.

Avoid making the same mistakes other homeowners make such as:

  • Not living within your means — which also means not being tempted to overextend when it comes to the property you purchase and the loan you need to finance it.
  • Not monitoring your loan's interest rate on a regular basis.
  • Not asking for help from experts when needed.

Other things to consider

  • Be smart from the get-go

It’s tempting to purchase a home that takes you to the absolute limit of your borrowing capacity. Granted, Australia’s housing market regularly experiences periods of huge growth which can leave you in a position where you do have to max out your borrowing limit just to get in.

All lenders must apply a risk buffer to your interest rate to stress-test how much you can afford in the event of a rising interest rate market. So technically, there is a bit of stretch in your capacity to repay and the cumulation of rising costs can push many of us to the edge and the money coming in can be just enough to cover outgoings.

Reconsider what you absolutely need when it comes to your home – can you downsize, live out a bit further, have access to and use public transport, be closer to work and or school? Borrowing less, and living within your means can help manage finances and budgeting in the long run.

  • Consider a shorter loan term

This option isn’t affordable and practicable for everyone, but if you have the means, shortening your loan term and making larger repayments over a shorter timeframe is a way of reducing the overall amount of interest you have to pay your home loan.

  • Make additional repayments

Again, this option isn’t feasible for everyone, but making additional voluntary or occasional bulk payments to your home loan will save you money - especially when it comes to the overall interest paid.

By following these strategies, you can ensure that your home loan interest rate stays as manageable as possible, no matter how the market fluctuates. Remember to always seek the opinion of financially knowledgeable people, like financial advisors before making any major decisions regarding your home loan. The team at Tiimely Home are always keen to listen and help point you in the right direction and talk through home loan options that could suit your requirements. Feel free to contact us anytime!

Tiimely Home — making home loans faster, smarter and simpler

If you’re looking for a simple home loan that will work hard alongside your financial plan, Tiimely Home may have the right loan for you. When you come to us for your home loan or refinancing needs, you can expect an application, assessment, and approval process that’s entirely online!

With low rates, fast online approvals, stellar customer service, and a host of other benefits, Tiimely Home gives you a high-tech online home loan with old-fashioned high-calibre service. As the country’s fastest online home application, you can count on us as your solution to rising interest rates with easy, low cost loans without the fuss of upfront and ongoing fees – our tech has enabled us to absorb a lot of those costs for you. How good is that?

If you have any questions about our services, feel free to contact us. Our customer care team is available all days of the week.

Diem Tran

By Diem Tran


Legal things about our rates
Our home loans are subject to credit criteria and eligibility requirements. Home loan interest rates are for new customers only and can change. Our comparison rates are based on a $150,000 loan amount over a 25 year term. They factor in fees associated with applying for the loan; ongoing fees and fees associated with leaving the loan. Our fixed loans roll to a variable principal and interest rate at the end of the fixed term. If the interest only period is not specified, the comparison rate is calculated on a one year period.

WARNING: The comparison rates are true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Tiimely Turnaround
^Our turnaround times are up to 2x faster than the industry, based on a comparison of our average platform submit to approval time compared to industry submit to approval time, published here  (June 2023). Customer turnaround times are dependent on individual circumstances and may require an assessor to obtain more information.

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Tiimely is a registered trademark of Tiimely Pty Ltd.