Australian homeowners are being urged to review household budgets and debt levels after the Reserve Bank of Australia left the cash rate target at 4.35 per cent on Tuesday, June 16, following three increases this year. The RBA said inflation remained too high and that it could lift rates further if required.

For borrowers with variable-rate loans, the priority is to put a possible rise into household figures. The Australian Government’s Moneysmart service recommends testing whether repayments would remain affordable if interest rates rose by two per cent, using its mortgage calculator.

A detailed budget should include item lines such as mortgage repayments, utilities, insurance, school costs, vehicle expenses and irregular annual bills, alongside discretionary spending. Directing surplus funds to high-interest debt or making additional mortgage repayments, where a loan permits it, can create a buffer against higher repayments.

Borrowers should review their rate and loan features rather than assuming their lender’s offer is competitive. Moneysmart says variable home-loan rates available in the market can differ by more than two percentage points, although refinancing costs and any lenders mortgage insurance must be weighed against potential savings.

Fixing a loan can make repayments predictable, but is not automatically the cheapest choice. Moneysmart notes fixed loans can limit extra repayments and may attract break fees if a borrower changes loans early; instead, a split loan may suit some households.

The Australian Prudential Regulation Authority requires banks to assess new borrowers with a three-percentage-point serviceability buffer, but existing borrowers should still test their own finances. Anyone struggling to meet repayments should contact their lender early about hardship assistance. Moneysmart also directs consumers to free financial counselling through the National Debt Helpline on 1800 007 007.