Interest Rates and What Rising Rates Could Mean for you? What should you do?
One of the most common questions I’m asked is: “Why do interest rates keep changing?” Closely followed by: “What happens if they go up?” or “ Should I take out a Variable or Fixed Loan?”
Interest rates affect far more than just your home loan repayment. They influence house prices, business investment, consumer confidence, and the overall health of the economy. Understanding why rates move — and what rising rates may mean — can help you make more confident financial decisions.
Why Do Interest Rates Go Up and Down?
In Australia, the cash rate is set by the Reserve Bank of Australia (RBA). While banks ultimately set their own lending rates, the cash rate is the foundation upon which most interest rates are built.
The RBA adjusts interest rates to balance two key goals:
• Keeping inflation under control
• Supporting sustainable economic growth
When the economy is running too hot — wages rising quickly, spending increasing, and inflation climbing — the RBA may increase interest rates. Higher rates make borrowing more expensive, which slows spending and helps bring inflation back under control.
Conversely, when economic growth slows, unemployment rises, or consumer confidence weakens, the RBA may cut interest rates to encourage borrowing, spending, and investment.
In short:
• Rates go up to slow the economy
• Rates go down to stimulate the economy
For self-employed customers (and businesses related to discretionary spending, such as Dentistry) an increase in rates can affect clients on multiple fronts:
– The customers they serve have less money to spend on discretionary items – hence your revenue drops
– The business loans you have will cost more.
– The Home Loans you have will cost more
– The Cost of Living has increased which is exactly why rates are increasing already.
Overall, self-employed customers can sometimes feel the pinch when it comes to cash flow.
Why It Looks Like Interest Rates May Rise Soon
At present, there are signs of ongoing inflationary pressure across the economy, including higher costs for housing, services, and everyday goods. While the exact path of interest rates is never guaranteed, current conditions suggest upward pressure remains.
Central banks, including the RBA, are cautious about cutting rates too early, as doing so could reignite inflation. As a result, borrowers should be prepared for the possibility that interest rates may rise and remain higher for longer, or increase again, depending on economic data.
What Rising Interest Rates Mean for Your Home Loan
If interest rates rise:
• Variable-rate borrowers will see their repayments increase, sometimes quickly.
• Fixed-rate borrowers are protected until their fixed term ends but may face higher repayments when they refinance.
Higher rates reduce borrowing capacity, meaning new borrowers may qualify for smaller loans than they would have during low-rate periods. For existing borrowers, this places greater importance on cash flow management, budgeting, and reviewing existing loan structures.
A well-structured loan — with the right mix of offset accounts, redraw, or split loans — can make a significant difference during rising-rate environments.
What It Means for House Prices
Interest rates and property prices are closely linked.
When rates rise:
• Borrowing power decreases
• Buyer demand often softens
• Price growth can slow, plateau, or even decline in some areas
That said, property markets are local. Supply shortages, population growth, and strong employment can still support prices even in higher-rate environments. Rather than sharp market-wide falls, rising rates often lead to more balanced conditions, with less competition and more negotiation power for buyers.
For long-term property owners, short-term price movements are usually less important than affordability and holding strategy.
What Rising Rates Mean for Businesses
Higher interest rates also affect businesses:
• Loans and overdrafts become more expensive
• Expansion plans may slow
• Cash flow management becomes more critical
For business owners, this is a time to review debt structures, ensure facilities are appropriate, and explore whether refinancing or restructuring could reduce risk. At present banks can look at 2024 financials and tax return but very soon banks will want to see 2025 finalised tax returns and potentially see interim figures for 2026, on how your figures are tracking.
If your new financials will see a decrease in turnover or more importantly profit, this will reduce your borrowing power or your ability to restructure debts. In plain terms, it is difficult to ask for the banks help on changing payments or borrowing additional money if you are already experiencing cash flow problems – do not wait to seek some advice.
The Bigger Picture: The Overall Market
Rising interest rates typically lead to:
• Slower economic growth
• Reduced discretionary spending
• More cautious lending environments
While this can feel unsettling, it’s important to remember that rate cycles are normal. Higher rates are designed to stabilise the economy, not derail it. Periods like this often reward careful planning, disciplined borrowing, and proactive advice.
How we can help
In changing rate environments, the value of professional advice increases. We can help with:
• Review your current loan and repayment exposure
• Help you prepare for future rate changes by taking some fixed rates or splitting your loans with fixed and variable to hedge your bets.
• Structure loans to improve cash flow and flexibility
• Compare lenders as pricing and policies shift
Interest rates will continue to rise and fall over time — that’s unavoidable. What is within your control is how prepared you are. We are a free service, and our bankers have more than 50 years of combined experienced with both business and personal lending. JS Medical and Dental Finance differ from our competitors with key differences being:
– Business and personal lending under one roof with one banker
– Independence – our main goals are the best rate and structure and not favouring an easy option or an in-house option.
– No Cost to the customer as banks pay us.
– Available to talk to someone with experience during and outside office hours.
In summary If you understand the cycle, have good banker and have the right loan structure in place, changing rates become something you can manage — not something you fear. Contact us today at JSMDF.COM.AU or 1300 829 134
Jason Savage is the Director of JS Medical & Dental Finance, a specialist brokerage dedicated to helping medical, dental, and allied health professionals navigate both personal and business lending. With over 25 years in banking and more than 20 years focused on healthcare finance, Jason provides tailored lending solutions across home loans, practice finance, and commercial lending.
Through his work, Jason helps healthcare professionals structure their finances to support long-term career growth and wealth creation. By combining deep industry knowledge with a personalised, relationship-driven approach, he simplifies complex financial decisions and supports clients at every stage: from first home to practice ownership and beyond.