A higher mortgage rate can make a noticeable difference to your household budget. The size and timing of the change depend on your loan balance, remaining term and whether your rate is fixed or floating.
When does a higher rate affect you?
On a floating loan, a change to your lender's rate can affect the floating portion when the change takes effect. On a fixed loan, the agreed rate usually stays in place until that fixed period ends; the repayment impact arrives if you refix at a higher rate. Check each portion separately if your mortgage is split.
Sorted explains fixed and floating mortgages and their trade-offs. A headline about the Official Cash Rate is not a repayment notice: use your lender's actual offered rate, effective date and loan terms.
A $600,000 loan: what changes each month?
The table shows hypothetical principal-and-interest repayments with a $600,000 balance and 25 years remaining. Each row uses monthly payments and the same balance and remaining term so you can compare rates directly.
| Annual rate | Monthly repayment | Extra vs 5.00% |
|---|---|---|
| 5.00% | $3,508 | — |
| 5.50% | $3,685 | $177 |
| 6.00% | $3,866 | $358 |
| 6.50% | $4,051 | $544 |
| 7.00% | $4,241 | $733 |
A rise from 5.00% to 6.00% is one percentage point. In this example it adds about $358 per month. Your result depends on your balance, remaining term, repayment frequency and loan structure.
Repayments and interest cost are different
An extra $100 a month in repayments is not the same as an extra $100 of interest. A principal-and-interest payment includes both interest and money that reduces the balance. When the rate changes, the mix changes too.
For an interest-only loan, a one percentage point rise on a steady $600,000 balance adds approximately $6,000 a year, or $500 a month using annual interest divided by 12. That is a different calculation because you are not repaying principal during that period.
If you have several loan portions, calculate each affected portion using its own balance and remaining term, then add the payments. Applying a new rate to the full mortgage overstates the immediate effect when only one portion is changing.
Prepare before your fixed rate expires
- Find each loan portion's balance, remaining term and fixed-rate expiry date.
- Ask your lender for current offers and the resulting repayment amounts.
- Run the repayment calculator at the offered rate and a higher scenario.
- Update your household budget and identify the gap you need to cover.
- If affordable, set aside the difference before the new payment starts to test your budget and build a buffer.
Our fixed or floating guide can help frame the questions to ask. Check your contract before changing a fixed loan early; break fees and other switching costs can affect the decision.
If the new repayments look difficult
Contact your lender early and explain your situation. Sorted's mortgage management guide discusses talking to your lender about options when payments become difficult. A term extension or temporary interest-only arrangement may reduce payments but can increase total interest and require lender approval.
Consumer Protection explains mortgage responsibilities and hardship rights. Ask about the lender's hardship process if relevant. Do not wait for missed payments to start the conversation.
CorePath Financial can help compare your loan options, including repayments and the costs of refinancing. Bring your current loan details and the written offers you have received.
Sources checked on 8 October 2026
General information only, not personalised financial or legal advice. Examples are hypothetical. Eligibility, rates, fees and lender conditions can change; confirm current details and get advice for your circumstances.