Living with higher for longer interest rates

Interest rates are rising and the Reserve Bank of Australia (RBA) has hinted that they could stay elevated for longer than expected.

While people who live off their investments, including self funded retirees welcome the rise, homebuyers must think about what higher rates will mean for them, especially if those rates stay higher for longer.

Many households put their lifestyles and financial decisions on hold until rates eventually start to come down – notably those who are looking to buy a home.

This might seem the wisest strategy, but can in fact, be financially risky. For example, property prices are often lower during periods of high interest rates. This means that buying at this time may mean borrowing less, which over the course of a 20 to 30 year mortgage, could see borrowers potentially save thousands.

If you already have a mortgage, the government’s Moneysmart website recommends you review it at least every year. This is not just to identify any features and benefits your lender offers that you may not have considered but to keep abreast of other lenders’ deals that may work better for you, particularly when interest rates are on the rise.

Here’s a five point checklist to evaluate your financial position in relation to your current or future housing loan. Some of these points you may have already considered, others you may not have. But as we buckle up in preparation for what could be higher for longer rates, it’s worth taking a look.

Higher for longer homebuyer five point checklist

1. What’s your current position? Conduct a review of your current financial situation. If you have a loan, understand its terms and conditions.

• How much do you currently owe or plan to borrow?
• What’s your current or anticipated loan type: fixed, variable, split?
• What is the current interest rate?
• What fees are you paying or expecting to pay; ongoing, break costs for fixed loans, etc?
• Anything else

2. Repayment strategies – Which of the following does your lender/potential lender offer?

• Fortnightly repayments
• Can you make extra repayments?
• Do you have a redraw facility and can you access redraw money?
• Do you have an offset account? What are the limitations, if any?

3. Stress test your budget – Assess your current financial position.

• Calculate your current/anticipated repayments if rates were to rise 0.5% or 1% higher than current. Could you manage?
• Do you have an emergency fund with 3 to 6 months of repayments?
• Do you have a household budget? This will help you identify areas where you can cut back discretionary spending.

4. Consider timing – What’s your level of risk tolerance?

• What’s the risk if you wait for rate cuts?
• What’s the risk if you renegotiate with your existing lender or seek a better deal with another lender? How will a long period of high rates affect your lifestyle, savings goals, retirement plans, etc?

5. Seek professional advice – A financial adviser and/or mortgage broker can be the difference.

• A mortgage broker will help you renegotiate your existing loan or identify a more appropriate lender. They can help you understand the features and benefits on offer and assist with the application process.
• A financial adviser will help with household budgeting enabling you to unlock your savings potential, maximise offsets, redraws and redirect savings. They can produce a written plan detailing repayment scenarios and cost projections.

According to a 2025 survey conducted by Finder.com.au, over the previous two years, 28% of Australians abandoned plans to buy a property due to high interest rates.

Naturally, one of the greatest concerns associated with investments is timing the purchase and/or sale. The real estate market is no exception.

While the reality of higher for longer rates can be daunting, and it’s understandable that so many homebuyers are leaning towards playing it safe, it is possible to remove some of the fear factor.

Take control by consulting a professional who will help you understand your options, reduce uncertainty and run the sums to see how you can still achieve your financial goals.

Bottom line: whether you choose to wait for rates to drop or you decide to act anyway, making uninformed decisions is never a good strategy.

And remember, it’s not always about the interest rate itself, it’s how you work with it.

^{Source: Financial Writers Australia}