Mortgage Guide
What Happens if Interest Rates Rise?
A rate increase has two possible outcomes depending on your loan structure.
Two Outcomes of a Rate Rise
Mode A: Keep the Same Term
Your repayments increase to cover the higher interest. The loan still ends on the original payoff date.
Mode B: Keep the Same Repayment
Your repayment stays the same, but your loan term extends — sometimes by several years.
Rate Increase Impact — $640,000 at 6.5%
Monthly repayment changes under Mode A (keeping original 30-year term):
Indicative figures only. Use the calculator for your exact scenario.
Fixed vs Variable Rate Loans
If you have a variable-rate loan, a central bank rate increase flows through to your repayments, typically within one to two billing cycles.
If you have a fixed-rate loan, your repayment is locked for the fixed period (usually 1–5 years). When it ends, your loan reverts to variable rate.
A common strategy is a split loan: fix a portion for certainty, leave the rest variable to benefit from rate drops and make extra repayments.
How to Prepare for Rate Rises
- 1.Stress-test now. Model a 2–3% rise to see what it means for your repayments.
- 2.Build a buffer. If you can absorb an extra $500–$1,000/month, you are in a strong position.
- 3.Make extra repayments. Every extra dollar reduces your principal, limiting future rate damage.
- 4.Review your fixed/variable split with a broker before your fixed period expires.
Stress-test your loan now
Model +1% to +4% rate increases and see exact repayment changes for your scenario.
Open Rate Stress Test