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Rate rise impact calculator

See what a 0.25% to 2% rate rise adds to your monthly payment.

  • Answers as you type
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% / year
years
Rate rise

Extra per month

$145.64

If your rate goes from 4.5% to 5.5%

Payment now
$1,389.58
Payment after the rise
$1,535.22
Extra per year
$1,747.65
Extra over the remaining term
$43,691.26
Payment up by
10.48%
Every rate rise on this balance
RiseNew paymentExtra / monthExtra / year
+0.25%$1,425.29$35.71$428.55
+0.5%$1,461.48$71.89$862.73
+1%$1,535.22$145.64$1,747.65
+1.5%$1,610.75$221.17$2,654.07
+2%$1,688.02$298.44$3,581.24

Assumes a repayment mortgage and the same remaining term. Figures rounded: 300.00 payments left.

How it works

Rate news is usually reported as a fraction of a percent, which sounds small. This turns that fraction into the number that matters: what leaves your account each month, and what it adds up to over the years you have left.

Payment = Balance x r / (1 - (1 + r)^-n), where r is the monthly rate and n the months remaining. The extra cost is simply the payment at the new rate minus the payment at your current rate.

Example: On a 250,000 balance with 25 years left at 4.5%, a 1% rise takes the payment from about 1,390 to about 1,535: roughly 146 more a month, or 1,748 a year.

How a rate change reaches your monthly payment, what different sized rises actually cost, and the four realistic options when the number goes up.

Why a small rate change is not a small number

A rate rise is announced as a fraction of a percent, so it sounds minor. Your payment does not work that way. Interest is charged on the whole outstanding balance, and on a large balance the interest part of the payment is most of the payment. Change the rate and you change that part immediately.

The capital part of your payment is fixed by the term: you still have to clear the same debt in the same number of years. So the entire rate increase lands on top of what you already pay, rather than being spread out or absorbed.

What each rise costs on a typical balance

250,000 balance, 25 years remaining, starting at 4.5%
RiseNew paymentExtra per monthExtra per year
+0.25%1,42536429
+0.5%1,46172863
+1%1,5351461,748
+1.5%1,6112212,654
+2%1,6882983,581
250,000 balance, 25 years remaining, starting at 4.5% — Rounded figures from the calculator above. Your balance, rate and remaining term will change them, but the shape stays the same.

The shock is front-loaded

The same rate rise costs far more in year three than in year twenty, because the balance it applies to is much larger. If you are early in a mortgage, treat rate risk as one of the biggest variables in your budget, not a rounding error.

It also cuts the other way: overpaying now shrinks the balance a future rise would be charged on, so it buys protection as well as saving interest.

Four realistic options

  • Overpay while the rate is still low. Every payment off the balance reduces what a future rise can be charged on.
  • Fix. You pay for certainty, and usually a slightly higher rate today, but the payment stops moving.
  • Extend the term. This lowers the monthly figure, but you pay interest for longer, so the total cost rises.
  • Absorb it. If the extra is manageable, changing nothing is a valid answer. Just make sure you have run the number rather than assumed it.

Questions people ask

Does a 1% rate rise mean my payment goes up 1%?

No, it is much more than that. Interest is charged on the whole balance, so a small change in the rate is a large change in the interest part of your payment. A 1% rise often lifts the payment by 10% or more.

Why is the increase bigger early in the mortgage?

The balance is largest at the start, and interest is charged on the balance. The same rate change on a smaller balance later in the term costs less each month.

When would the new rate actually apply?

If you are on a fixed deal, not until the fix ends. Tracker and variable rates usually move within a month or two. The calculator shows the cost once the new rate applies.

What can I do if the rise looks unaffordable?

The usual options are to overpay now while the rate is lower, fix for certainty, extend the term to cut the monthly figure, or absorb it in the budget. Try the payoff calculator to see what overpaying achieves.

Should I fix as soon as rates start rising?

It depends on how much certainty is worth to you. Fixing removes the risk but locks in today's rate, so if rates fall you keep paying the higher one. Run both figures here before deciding.

How much rate headroom should my budget have?

A common rule of thumb is to check you could still cope with a 2% rise. The table above shows what that costs on your own balance.

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