RBA Housing Interest Rate Trends

The following chart illustrates the average rates on mortgages by purpose for the front and back books. This reflects the margins on new loans (the front book) and the back book (existing loans). Interest rates differences are driven by:

• on variable rates the front book, margins tend to be slightly lower than the back book as refinancing customers are able to extract some pricing discounts which less mobile customers often miss out on;
• for fixed rate loans back book margins reflect prevailing rates and the impact of recent rate changes, the current climate illustrates the average rates on fixed rate loans written prior to 2023 are still significantly below variable rate loans.

Mortgage margins here cover the period to .

Source: RBA Table F06 Housing Lending Rates.

Front Book Mortgage Margins

Mortgage margins are measured against government bond rates for front book loans only calculated against the government bond rate at month end. After a period of inverted yields and tight competition for fixed rate mortgages, since 2023 margins on mortgages have reverted back towards a fixed rate premium, especially on investment mortgages where margins to funding costs in 2024 have been almost double those on variable rates.