Current Interest rates in Australia

Home loan interest rates as of October 2024

The RBA cash rate is currently at its highest level in more than a decade, and it's had a major impact on home loan interest rates.

The typical interest rate on a new owner-occupied home loan is around 6.30% p.a., according to the latest RBA figures. A new investor home loan, meanwhile, comes with a typical rate of around 6.50% p.a.

That’s not to say there aren’t still competitive home loans on the market. In fact, there are plenty of deals out there that could be worth considering if you’re buying or refinancing in the current rate environment.

Keep scrolling to find a rundown of some of the lowest-rate home loans available right now.

See also: 10 ways to pay off your mortgage faster

What is the RBA cash rate?

If you’re in the market for a mortgage product, or perhaps you’re simply comparing your options, you’ve probably come across talk of the RBA cash rate.

The Reserve Bank of Australia’s (RBA’s) overnight cash rate target (often simply called the cash rate) influences many things. Though, home loan holders are likely most concerned with how it impacts interest rates.

In the simplest terms, the RBA cash rate determines how much lenders need to pay to borrow money. The higher the cash rate, the more expensive it is for a bank to operate day-to-day.

Therefore, when the cash rate is high, so to will be the interest rates that banks and lenders charge to borrowers and provide to depositors. After all, banks and lenders want to protect their bottom line, just like the rest of us.

The cash rate is currently 4.35% – its highest level since 2011.

The below chart shows how the cash rate has moved in recent times:

Why do we need a cash rate?

The cash rate serves as a crucial tool in managing the economy.

By adjusting the cash rate, the RBA can influence economic activity, control inflation, and ensure financial stability.

When the economy is overheating and inflation – that is, the price of goods and services – is rising too quickly, the RBA might increase the cash rate to make borrowing more expensive. That, in turn, can be expected to cool down spending and investment.

On the other hand, when the economy is sluggish and growth is subdued, a lower cash rate can stimulate it by making borrowing cheaper and encouraging spending.

Essentially, the cash rate acts as a lever to balance economic growth and maintain a healthy financial system.

However, the cash rate is not without its faults. It is often described as a 'blunt tool' because changes to the rate ripple across the entire economy, impacting far more than just the intended targets.

Why does the RBA cash rate impact home loan interest rates?

To explain how the RBA cash rate influences home loan interest rates, we need to start with how banks manage their money.

Regulations demand that banks maintain a certain level of liquidity at the end of each day. This means they must have a certain amount of cash on hand.

Cash deposits – such as those in savings accounts and term deposits – count towards a bank’s liquidity, while funds lent to borrowers reduce its liquidity.

If a bank disburses more funds through loans and deposit withdrawals within a single day than it receives in new deposits and loan repayments, it might struggle to meet its liquidity requirements.

That’s when the cash rate comes in. A bank can choose to borrow the necessary funds overnight to meet its liquidity needs, and it will be charged the overnight cash rate set by the RBA.

For that reason, when the cash rate is high, so is the cost of doing business for banks. When the cost of doing business is high, banks increase interest rates charged to borrowers to recoup their higher costs.

However, the cash rate isn’t the only factor that impacts home loan interest rates. Sometimes, lenders will adjust their home loan interest rates even if there has been no change in the cash rate. These ‘out of cycle’ home loan rate changes happen frequently.

Current home loan interest rates available now