For the first time since 2010, the Reserve Bank of Australia (RBA) [increased the official cash rate](https://www.lendi.com.au/inspire/finance/interest-rates-are-rising-how-to-save/) in May 2022. Since then, lenders and deposit-taking institutions have started lifting [interest rates](https://www.lendi.com.au/home-loans/interest-rates/) accordingly.

But what does it mean for your finances? In this article, we explain 5 ways you might be impacted by rising interest rates.

- __Related:__ [How to save on your mortgage when interest rates rise](https://www.lendi.com.au/inspire/finance/interest-rates-are-rising-how-to-save/)
- __Related:__ [7 ways to prepare for an interest rate increase](https://www.lendi.com.au/inspire/finance/how-to-prepare-for-an-interest-rate-increase/)
- __Related:__ [How interest rate increases could impact new borrowers](https://www.lendi.com.au/inspire/finance/interest-rate-increases-impact-new-borrowers/)

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## 1. Home loan repayments are increasing

Whether you already own your own home or you’re looking to buy a property, [home loan repayments are going up](https://www.lendi.com.au/inspire/finance/interest-rate-increases-impact-new-borrowers/).

Many mortgage lenders have already increased interest rates on their home loan products. For those who are currently paying off a [variable rate mortgage](https://www.lendi.com.au/home-loans/variable-rate/), chances are your interest rate has already risen in line with the cash rate increases.

However, there can be a lag between when the cash rate is hiked and when borrowers feel the effect of this hike on their [home loan repayments](https://www.lendi.com.au/calculators/home-loan-repayment-calculator/). So, you may still have further interest rate rises to come. 

Borrowers on [fixed rate home loans](https://www.lendi.com.au/home-loans/fixed-rate/) won’t feel the effects of interest rate hikes until their [fixed term ends](https://www.lendi.com.au/inspire/finance/how-to-prepare-for-higher-repayments-when-your-fixed-rate-ends/). 

While some homeowners might be concerned about the impact rising home loan repayments will have on their wallet, research shows that many Australians are actually [ahead on their mortgage repayments](https://www.lendi.com.au/inspire/finance/why-aussie-households-are-years-ahead-of-their-home-loan-repayments/). 

If your repayments are becoming difficult to manage now that rates have risen, speak to your lender or a [Home Loan Specialist](https://www.lendi.com.au/book-appointment/) for help.

%%Get free expert advice on your home loan%%

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## 2. Repayments on debts like personal loans, car loans and credit cards are rising

It’s not just home loans that are affected by rate rises. Interest rates on other types of debt like personal loans, car loans and credit cards are lifting too.

This means your repayments are likely to increase. However, much like home loan interest rates, rates on these debts will rise slowly and in small increments.

If you are concerned about paying back various debts with rates on the rise, you might want to consider [consolidating your debt into your home loan](https://www.lendi.com.au/home-loans/debt-consolidation-loans/).

[Debt consolidation](https://www.lendi.com.au/calculators/home-loans/debt-consolidation-calculator/) involves bundling your existing debt into your home loan, so you only make one monthly repayment. Your consolidated debt will be charged interest at the same rate as your home loan. 

Not only does this streamline your repayments, but home loan interest rates are typically lower than rates on other debts – so you can save money by paying one lower interest rate.

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## 3. Earn more on your savings with higher interest rates

An upside to rising interest rates is that many Australians will benefit from a boost to their [savings](https://www.lendi.com.au/inspire/finance/supercharge-your-monthly-savings-tips/).

When the RBA raises the cash rate, this can have a flow on effect on interest rates across the board. This means not only do interest rates on debts go up, but so do interest rates applied to assets.

Interest rates have seen record lows in the last 2 years. If you have a high interest savings account or a term deposit, it’s likely that you haven’t earned much interest in this time.

Some deposit-taking institutions have already started to increase interest rates on their savings accounts and term deposits. 

While it’s likely rates will continue rising over the coming months, now could be a good time to compare how the interest rate on your savings account stacks up. 

Don’t be afraid to switch if you find a better deal elsewhere.

%%Have you checked interest rates lately?%%

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## 4. Some investment returns are gaining as rates rise

If you own shares, you may be in luck as interest rates start rising in Australia.

This is because shares in certain industries and companies benefit from rate hikes, which can strengthen your investment portfolio.

For example, shares in industrial companies and retailers can perform well as the economy improves and interest rates rise. 

On the other hand, shares in sectors like real estate may soften, since the housing market has historically slowed down when interest rates were on the rise.

Statistics from [Commonwealth Bank’s Household Spending Intentions (HSI) Index](https://www.mortgagebusiness.com.au/economy/16775-australians-tighten-home-buying-spending?utm_source=MortgageBusiness&utm_campaign=MBBULLETIN11_05_22&utm_medium=email&utm_content=1&utm_emailID=dc91a498100170a397c716cf1ab95e146a892515b513824b882644a8a9fd9fb3) show that Australians are indeed spending less on home-buying and more on entertainment and travel. 

So, retailers in these sectors where Australians are spending more could see their share prices rise.

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## 5. House prices are dropping

Good news for prospective home buyers – the tide is turning on house prices now that the cash rate has increased.

After years of skyrocketing prices, dwelling values have started to decline across Australia. This decline has been most noticeable in capital cities like Sydney and Melbourne. 

Why? Because with higher rates, [borrowers](https://www.lendi.com.au/home-loans/calculators/borrowing-power-calculator/) don’t have the capacity to borrow as much as they have for the last couple of years. This can help to drive down house prices.

It’s important to note that other factors can impact the relationship between interest rates and house prices, like wage growth, for example. 

But, if you’ve been saving up for your dream home, it might soon become more affordable.

Declining house prices aren't all good news though. If you own a home and its value drops, you could have less home [equity](https://www.lendi.com.au/calculators/equity-calculator/). 

This can make it more difficult if you want to [refinance](https://www.lendi.com.au/home-loans/refinance/), since lenders usually require at least 20% equity for you to be eligible to refinance.  

Do you want to know how interest rate rises will impact your home loan? Our Home Loan Specialists are here to help. [Book an appointment](https://www.lendi.com.au/book-appointment/) at a time that suits you. 

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## What could your home loan repayments look like?

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## Got a home loan question? Just ask!
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a [Home Loan Specialist here](https://www.lendi.com.au/book-appointment/)

*The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.*

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