Australian homeowners may be facing another increase in borrowing costs, with NAB forecasting a 0.25 percentage point increase to the RBA cash rate at the 28–29 September 2026 meeting. NAB has also identified the possibility of a further increase in November if inflation and economic activity remain stronger than expected.
The Reserve Bank of Australia’s official cash rate target is currently 4.35%, with the next decision scheduled for 29 September 2026. However, forecasts are not guarantees. The final decision will depend on incoming inflation, employment and economic data.
For a homeowner with a $600,000 variable-rate loan, the impact could be significant:
- One 0.25% increase may add approximately $91 per month.
- Two 0.25% increases may add approximately $183 per month.
These are indicative figures only. Your actual increase will depend on your interest rate, remaining loan term, repayment type and how your lender responds.
The key point is that rising rates make your loan structure more important than ever. Simply accepting the default mortgage product may mean missing opportunities to reduce mortgage interest, build equity faster and potentially pay off your mortgage sooner.
Here are five practical strategies to consider.
Why the RBA cash rate matters to your mortgage
The RBA cash rate is the interest rate banks pay when borrowing funds from one another overnight. According to the RBA’s cash rate explanation, it influences other interest rates throughout the economy, including home loans and savings accounts.
When the cash rate rises, lenders may increase variable home loan rates. As a result:
- Your required repayment may increase.
- More of each repayment may go towards interest.
- Your loan may take longer to repay if you reduce your repayments.
- Your household budget may have less room for savings and other goals.
Supporters of fixed rates argue that they provide repayment certainty. Critics point out that fixing can limit flexibility and may prevent borrowers from benefiting if rates later fall. In reality, there is no single best option for every household.
The right approach is to assess your cash flow, financial goals and expected plans before choosing a loan structure.
1. Use a mortgage offset account strategically
A mortgage offset account is a transaction account linked to an eligible home loan. The balance is generally deducted from your loan balance when your lender calculates interest.
For example:
- Home loan balance: $600,000
- Offset account balance: $30,000
- Interest calculated on: approximately $570,000
You still owe $600,000 on the loan, but the offset can reduce the amount on which interest is charged.
The main mortgage offset account benefits include:
- Reducing the interest charged over time.
- Helping more of each repayment reduce your principal.
- Providing access to your savings for emergencies or planned expenses.
- Potentially helping you pay off your mortgage faster.
- Allowing your salary and regular savings to work more efficiently.
The benefit depends on the balance you maintain. An offset account may be less valuable if its fees and interest rate premium exceed the interest savings it produces.
Furthermore, ASIC’s recent offset account review highlighted the importance of checking that an offset account has been correctly opened and linked. ASIC reported that banks had paid more than $55 million in compensation for offset account failures identified during the relevant review period.
If you have an offset account, check regularly that:
- It is open and active.
- It is linked to the correct home loan.
- Your balance is reducing the interest charged.
- The link has not been removed after refinancing or changing products.
2. Make extra repayments when your budget allows
Extra repayments are one of the simplest home loan payoff strategies. Paying even a modest amount above your minimum repayment can reduce your loan principal and the interest charged in future months.
You could consider:
- Making weekly or fortnightly repayments instead of monthly repayments.
- Adding a fixed amount to every scheduled repayment.
- Paying lump sums from bonuses, tax refunds or other windfalls.
- Directing part of a pay rise towards the mortgage.
- Making additional repayments before interest rates increase further.
For example, paying an additional $100 per fortnight may seem relatively small, but the long-term effect can be meaningful because the extra money reduces the balance on which future interest is calculated.
However, check your loan conditions first. Variable loans often provide greater repayment flexibility, while fixed-rate loans may limit extra repayments or charge fees once a permitted threshold is exceeded.
An offset account and extra repayments can achieve a similar interest-saving result on an eligible variable loan. The difference is accessibility:
- Money in an offset is generally easier to access.
- Extra repayments may be less accessible unless your loan includes a redraw facility.
- Redraw access can be subject to lender conditions and may affect future loan structuring.
3. Consider debt recycling carefully
Debt recycling is a more advanced mortgage reduction strategy. Broadly, it involves gradually converting non-deductible home loan debt into investment-related debt while using available cash flow to reduce the home loan.
Interest on a loan used for a qualifying income-producing investment may be tax deductible in some circumstances. However, deductibility depends on how the borrowed money is used, how the loans are structured and whether the transactions can be clearly traced.
A typical debt recycling arrangement may involve:
- Making an additional repayment on the home loan.
- Redrawing an equivalent amount through a separate loan split.
- Using the redrawn funds for an eligible investment.
- Continuing to direct surplus cash flow towards the home loan.
This strategy may help some investors build assets while reducing non-deductible debt. Nevertheless, it also introduces investment, borrowing and tax risks.
You should obtain individual advice from a qualified financial adviser and tax professional before proceeding. Debt recycling is not suitable for every borrower, particularly if you have limited cash reserves, uncertain income or a low tolerance for investment losses.
4. Assess fixed, variable or split-loan options
A fixed-rate loan provides a degree of repayment certainty for an agreed period. This can be helpful if you need predictable payments or believe your budget would be under pressure from further increases.
A variable-rate loan generally provides more flexibility, including potential access to:
- Offset accounts.
- Unlimited or higher extra repayments.
- Redraw facilities.
- Easier changes to the loan structure.
A split loan combines fixed and variable portions. This may allow you to secure some repayment certainty while keeping part of the loan flexible and eligible for an offset account.
Before fixing any part of your loan, consider:
- How long you expect to keep the property.
- Whether you may sell or refinance during the fixed period.
- How much you normally save.
- Whether you expect a bonus, inheritance or other lump sum.
- The permitted extra repayment limit.
- Potential break costs.
- What rate applies when the fixed period ends.
The lowest advertised rate is not always the most suitable option. A slightly higher-rate loan with a well-used offset account may produce a better overall result than a cheaper product with no flexibility.
5. Review your entire loan structure with a mortgage broker
Many homeowners focus on negotiating a lower interest rate. That matters, but the broader structure can be equally important.
A professional mortgage review can examine:
- Your current interest rate compared with available alternatives.
- The remaining term of your loan.
- Whether the loan is principal-and-interest or interest-only.
- Offset and redraw features.
- Annual fees and package costs.
- Fixed-rate expiry dates.
- Whether multiple debts should be consolidated or separated.
- Whether your current repayments are aligned with your financial goals.
- The potential costs of refinancing.
Flexible Mortgages works with a panel of Australian lenders and provides personalised finance strategies for homeowners, investors and refinancers. The aim is not simply to find another loan, but to assess whether the structure fits your budget, lifestyle and long-term objectives.
A Smart Home Loan Discovery discussion can help you identify potential cost-saving opportunities and understand which options may be relevant to your situation. Flexible Mortgages also provides information about home loans, refinancing and split-loan options.
A practical checklist before September’s RBA decision
Whether or not the RBA raises rates in September, you can prepare by:
- Checking your current interest rate and remaining loan term.
- Calculating repayments at 0.25% and 0.50% higher rates.
- Reviewing your household budget.
- Confirming your offset account is correctly linked.
- Checking your fixed-rate expiry date and repayment limits.
- Comparing your current loan structure with alternatives.
- Building an emergency cash buffer before making large extra repayments.
- Seeking tax advice before considering debt recycling.
- Reviewing the loan with a mortgage broker rather than relying only on an advertised rate.
The goal is a smarter mortgage, not simply a cheaper rate
A rate rise can increase financial pressure, but it can also prompt a valuable review. The right combination of an appropriate loan structure, disciplined repayments and effective use of an offset account may help you reduce mortgage interest and move towards financial independence sooner.
At Flexible Mortgages, our approach is built around understanding your goals before recommending a structure. In suitable circumstances, strategic mortgage planning may help reduce a conventional loan term substantially: potentially by many years: while avoiding the risk of paying two or three times the original value of your home in interest.
If you would like to understand your options, you can arrange a no-obligation Smart Home Loan Discovery discussion with Flexible Mortgages. It is an opportunity to ask questions, review your current position and explore practical home loan payoff strategies without pressure.
Book a free Smart Home Loan Discovery discussion or contact Flexible Mortgages in Endeavour Hills, Victoria.
General information only. This article does not constitute personal financial, credit or tax advice. Loan availability, fees, interest rates, lender policies and tax outcomes vary. Consider obtaining advice appropriate to your circumstances before changing your home loan or using a debt recycling strategy.