What is the Average Mortgage Interest Rate in Australia?
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Australian homeowners, property investors, and expats often look to average mortgage rates as a key benchmark to assess borrowing costs and ensure their loans remain competitive.
As interest rates are one of the most fluctuating variables in the lending landscape, understanding these movements is critical—especially for those managing property portfolios from overseas.
This guide explains how average rates are determined in Australia, details the current opportunities available for expats, and explores how factors like the RBA cash rate influence the decisions you make for your home loan.
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What Are the Average Mortgage Interest Rates in Australia?
As of May 2024, the average mortgage interest rate in Australia for owner-occupied properties is around 6.80% per annum. This is a national average and can vary depending on the lender, loan type (fixed vs variable rates), and borrower creditworthiness.
In regard to the Australian housing market trends, QBE’s 2022-2025 Australian Housing Outlook report predicts volatility in Australia’s property market over the next three years, with median house prices expected to fall to between $647,000 and $996,000 by June 2025.
Rising interest rate influences will likely lead to a correction phase, with Sydney experiencing the sharpest downturn, while Perth may benefit from the strength of the mining sector. The rental market will face pressure from returning migration, and unit prices are expected to be more resilient than house prices.
Outstanding Australian Home Loan Rates
The current mortgage rates for existing home loans tend to be higher. For example, the average variable interest rate for existing customers at the Big Four banks is around 7.41% per annum.
Considering mortgage interest trends, interest rates were low in 2022 but started rising in 2023. By June 2023, the average interest rate for outstanding variable-rate owner-occupied home loans was around 6.24%.
New Home Loan Rates
New borrowers often have access to more competitive rates as lenders try to attract new customers. The average variable rate for new home loans can be slightly lower than for existing loans. For instance, some of the lowest mortgage lender rates available in the market range from 5.69% per annum to 6.28% per annum.
In 2022, the mortgage interest trends headed towards a downfall and interest rates were relatively low. The Reserve Bank of Australia (RBA) cash rate started at 0.10% in April 2022, which meant new home loan rates were likely around 3-4%. This would translate to similar rates for outstanding loans originated in this period (assuming they were variable rate).
The RBA Cash Rate
The RBA cash rate is the interest rate on loans between banks (the loans are unsecured and sent overnight). This is the primary benchmark for interest rates, considering the various economic factors affecting rates in Australia.
The current RBA cash rate as of May 29, 2024, is 4.35%.
The Australian Reserve Bank rates were as low as 0.10% in 2022 The trend in 2024 has been one of increases. The RBA has been gradually raising the cash rate to combat inflation.
What Types of Interest Rates Are There for Expats in Australia?
One of the most significant decisions an expat needs to make when applying for a home loan in Australia is to decide on an interest rate.
There are multiple interest rates for home loans, including fixed, variable, and partially fixed. Here are all the available interest rates for expats in Australia and their pros and cons.
Fixed Interest Rate
A fixed rate home loan is an interest rate that remains unchanging for a certain period. A fixed rate home loan usually lasts for around five years. You can choose to change to a variable interest rate after your fixed rate runs out, or you can arrange another fixed rate for a new period.
Pros of Fixed Rates
There are multiple reasons to choose fixed rate loans, including:
- You know what your home loan monthly repayments will be, so you can budget effectively to keep your financial situation in check.
- You are protected from sudden spikes in interest, unlike variable interest rates. The predictability of a fixed rate loan means you don’t have to worry about any interest changes.
- There are generally fewer features of a fixed rate, so it’s less expensive.
Cons of Fixed Rates
Despite the predictability of a fixed rate, there are a few downsides. Some of the downsides of a fixed rate include:
- You can benefit from variable interest rates if the interest rate decreases. However, you won’t be able to capitalise on this because you’re lock in on a specific rate.
- You can switch to a variable interest rate when your fixed rate period ends. However, you will have to pay a break fee (the break fee will be higher if the interest rates have gotten lower since you started your fixed rate). There are also ongoing fees.
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Variable Interest Rate
The opposite of a fixed rate; it can fluctuate depending on whether the interest rate goes up or down. The interest can change for numerous reasons, including changes in the property market, changes to the official cash rate, and more.
Pros of Variable Rates
- A variable rate loan has more features than a fixed rate loan, so it is more flexible.
- With a variable rate on a home loan, there is always a good chance that you can end up paying less interest (if the interest rates go down). These changes in the interest rate affects your repayments. You can also create an offset account for the home loan to pay less interest.
- If you find a better variable rate loan or want to switch to a fixed rate loan, it is easy to do so, and you won’t need to pay any additional fees or ongoing fees.
Cons of Variable Rates
- If you are an expat who needs to budget to keep your financial situation in check, a variable rate is not advisable because the interest rates will fluctuate often. You can’t create a monthly plan in case the interest rates rise.
- Despite more features in a variable rate loan, they will make the loan cost a lot more.
Partially Fixed Interest Rate
Both a fixed rate home loan and a variable rate home loan have excellent features and significant downsides. Therefore it can be difficult for an expat to choose between them. However, there is a third option.
If you can’t decide between the two interest rates, you can choose a partially fixed interest rate (also called a split loan), which essentially combines the two interest rates.
A partially fixed interest rate home loan splits the home loan in half; you can make half of the loan a fixed rate and the other half and variable rate. Alternatively, you can split the loan any way to want, for example, 80% fixed and 20% variable rate.
Other loans include principal and interest loans and a smart booster home loan. A principal and interest home loan allows you to pay off a part of the full loan and some interest every month (principal and interest equals full loan and interest of the loan). A smart booster home loan is a home loan with a small starting rate and no ongoing fees.
Conclusion: Average Mortgage Interest Rates in Australia
Australia’s average home loan interest rate is 6.80% per annum for owner-occupiers, with 7.41% being for outstanding home loans and as low as 5.69% for new home loans (based on May 2024 statistics). Both of these numbers are currently on an upward trend due to inflation. Therefore, new home loans are best for expats because they have the lowest interest rate.
Expats should consider variable rates on home loans because they have the chance for less interest, but there are also fixed loans, principal and interest loans, and more.
For proper home loan interest rate comparison and a comprehensive overview of the Australian mortgage market, including mortgage rate statistics, home loan rate analysis, and interest rate forecast, contact our team!
Get a free Australian mortgage assessment today.
Frequently Asked Questions
What is the average mortgage interest rate in Australia?
The average home loan interest rate in Australia is 7.41% per annum for outstanding home loans and from 5.69% to 6.28% per annum for new home loans. Both of these are on an upward trend.
What types of mortgage interest rates are available for expats in Australia?
There are three primary home loan interest rates available in Australia, including:
- Fixed home loan options have a specific interest rate; great for budgeting, but you will miss out if the home loan interest rate lowers.
- Variable interest rate home loan options are great if you want lower rates but aren’t advisable for budgeting.
- A split home loan is a mixture of both rates.
How can an offset account help with reducing interest?
An offset account is an account that links to your home loan. An offset account is excellent for helping to reduce the interest on your home loan because the more of your home loan is in the account, the less your interest will be (an offset account is excellent for expats because of this).
You can open an offset account via your bank.
How can expats save on interest payments in Australia?
Expats need to get the lowest home loan interest rates possible when applying for a home loan, especially if you need to budget.
You can use our mortgage repayment calculator to work out the best possible repayment plan for your mortgage. It will tell you precisely what your mortgage repayments will be and how much interest you can save when using the plan. You can also open an offset account.
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