After three rate rises in 2026, some borrowers are looking beyond refinancing and reconsidering how their mortgage is set up.
The Reserve Bank has increased the cash rate by a total of 0.75 percentage points this year, and most lenders have passed those increases through to variable-rate customers.
As repayments rise, borrowers are exploring different ways to manage cash flow.
One option gaining attention
Some borrowers are considering switching from principal-and-interest repayments to interest-only repayments.
That can reduce monthly repayments in the short term because you’re temporarily paying only the interest, not the loan principal, although repayments are higher over the life of the loan.
Why interest-only isn’t for everyone
Interest-only can improve flexibility during periods of higher costs or reduced income.
But there are downsides:
- The loan balance doesn’t reduce during the interest-only period.
- Repayments can jump later when principal repayments resume.
- Lenders may charge higher interest rates for interest-only loans.
That means it’s usually more of a short-term strategy than a permanent solution.
Why borrowers are planning ahead
With rates potentially rising further, many borrowers are now stress-testing their budget rather than assuming conditions will quickly improve.
That includes reviewing:
- Loan structure.
- Repayment buffers.
- Offset balances.
- Fixed versus variable options.
I can help you understand the pros and cons of different loan structures and assess what may suit your situation in the current environment.
