Rates Are at an 18-Year High: What IT Professionals Can Do about their Home Loan

IT income can include bonuses and contract rates, and some LMI options depend on your employer or certifications, so the full picture of your income and role matters when you review a loan. The RBA raised the cash rate by 0.25 percentage points to 4.85% on 3 November. You can't control the cash rate, but you can review your loan, your budget and your options.

Key takeaways

• Check your new repayment amount and when it starts.
• Ask your lender for a lower rate before you do anything else.
• Compare the total cost of refinancing, not just the new rate.
• An offset buffer can cut interest and cover income gaps.
• Contact your lender early if repayments are getting hard.

What the rate rises mean for your repayments

When the cash rate rises, variable loan rates may change, and each lender decides if and when. The RBA raised the cash rate to 4.85%, the fifth rise this year and 1.25 percentage points in total, taking it to the highest level in 18 years.

Example: $600,000 loan, rate rises from 5.50% to 6.75%

This is an illustrative example only. Variable loans change now, fixed loans change when the fixed term ends, and each lender sets when a change takes effect. The RBA's latest Financial Stability Review found most mortgaged households remain well placed, though it noted pockets of stress.

If you're paid fortnightly or monthly, consider matching your repayments to your pay cycle so the money leaves your account just after pay lands.

Know your numbers before you call your lender

Gather a short set of figures first, so any conversation with your lender or broker is quick and specific. You'll want:

• your current rate, loan balance and remaining term
• your estimated property value and LVR (loan to value ratio, which is your loan as a percentage of the property's value)
• any fixed-rate expiry date
• your new repayment amount and its start date

Separate your base salary from bonuses, allowances and contract income, because lenders treat each differently. Note whether you're permanent, a contractor or a consultant, plus your employer and any certifications, as some LMI options depend on them. Our guide to understanding your income shows how this is usually assessed.

Ask for a rate review, or consider refinancing

The quickest step is to compare your rate with what your lender offers new customers and ask for a lower one. Having at least 20% equity and a good credit score can help when you negotiate. We cover this in more detail in getting a lower interest rate.

If your lender won't move, refinancing is the next option, and a broker can compare loans across a panel of lenders. Costs can include discharge, application, valuation and switching fees, fixed-rate break fees, and possible stamp duty. The Moneysmart mortgage switching calculator shows how long it could take to recover those costs.

Banks and other APRA-regulated lenders generally assess your repayments at a rate at least 3 percentage points above the loan rate, according to APRA. Non-bank lenders set their own assessment rules.

Falling property values can reduce your equity, which affects your LVR, pricing and whether LMI applies. LMI (lenders mortgage insurance) is a one-off cost that may apply when you borrow more than 80% of the property value, and it protects the lender, not you. If you have less than 20% equity, you can ask whether part of the LMI on your current loan can be refunded.

Restarting a 30-year term can increase the total interest you pay, even if your repayment drops. Keeping a similar remaining term, or keeping your repayments the same, limits that effect. Lenders also vary in how much bonus and contract income they count and how much history they ask for.

Can IT professionals avoid paying LMI?

Some lenders waive LMI for IT professionals, which means LMI would normally apply but isn't charged because of your job. Others offer lender-paid LMI, where the loan is still insured but the lender pays the premium, which is reflected in the pricing. Here are examples available at the time of writing, and a lender missing from this list may still have an option, as not every lender has been reviewed. Check each lender's current policy before you apply.

Lenders that waive LMI for IT professionals

• Bankwest: for PAYG technology professionals at a listed employer with six months employment, up to a 90% maximum LVR. Check whether your employer is on its list.
• Bank of Sydney: may waive LMI by exception up to 90% LVR for cyber security professionals holding CISM, CISA, CISSP or an equivalent certification. You'll need to earn at least 50% of your income from the profession and have at least three years in the field.

Lender-paid LMI

• Granite: up to 90% or 95% LVR for degree-qualified engineering and IT professionals. The main income earner needs to be a degree-qualified professional, though for IT roles Granite may accept a lesser qualification such as an industry certification, TAFE certificate or Diploma. Confirm with Granite. It's for owner-occupied established purchases, not refinancing.

Other options

• Mortgage Mart (Ocean and Ultra), ubank, Bluestone, Connective Elevate and Resimac also offer low-deposit or no-LMI options, and their LVRs, loan limits, fees and conditions vary, so ask a broker for their current terms.

How to compare them

• Eligibility differs, so check your employer, certifications, degree and work history against each lender's conditions.
• Granite is for purchases, so if you're refinancing, ask a broker which of the other options could apply to you.
• A waiver saves the LMI cost, but compare the rate, fees and features too, as risk fees, lender-paid LMI and different pricing can sometimes cost more over time than paying LMI. If an equity release takes your LVR above 80%, check these options before you apply.

Lender criteria change often, and a broker can check which options you qualify for through a Loan Health Check. See also our page on LMI waivers for tech industry workers. All lending is subject to credit approval.

Structure your loan: splits, offsets and equity release

A split loan divides your debt into a fixed portion and a variable portion, which gives you some repayment certainty and some flexibility. An offset account is usually linked to the variable portion, and it reduces the balance you're charged interest on while keeping your money accessible. Money in an offset doesn't earn interest, and loans with an offset can come with higher rates or package fees.

Some borrowers may be able to increase their loan when refinancing and hold the extra in an offset as a cash buffer. This is the idea behind an equity release.

Example at 6.75% over 30 years

This is illustrative. The repayment rises by about $324 a month, while $50,000 sitting in a 100% offset cancels about $281 a month in interest. That saving falls as the buffer is spent.

Before going ahead, check these points:

• The lender assesses the higher loan amount and may ask how the funds will be used.
• Costs include refinancing fees, break costs, package fees and offset fees.
• The offset should be a 100% offset, not partial, and correctly linked to the loan.

If the extra borrowing takes your LVR above 80%, revisit the LMI section above. Interest deductibility depends on the purpose of the borrowing, so speak with your accountant, who can advise on your situation.

A buffer is a safety net, not spending money, and it won't fix repayments that are already unaffordable. Make extra repayments only if your household can afford them. For IT professionals, a buffer can help if a contract ends, a bonus is cut or a redundancy round hits, and you can direct bonuses into the offset rather than the everyday account.

Tighten the household budget

Reviewing your regular bills can help you find room in a tighter budget. Check subscriptions, insurance, energy and phone plans.

Credit cards and buy now, pay later can add monthly pressure. Debt consolidation may lower your repayments but stretch the debt out over a longer period. Build your core budget on base salary and treat bonuses as a bonus, not a certainty.

Fixed, variable or split?

A fixed rate gives repayment certainty, while a variable rate gives flexibility. Extra repayment limits and offset or redraw access depend on the loan terms and vary between lenders. A split loan, covered above, blends the two.

The RBA's next decision is on 8 December, and it says incoming data and its assessment of the outlook and risks will guide its decisions. If your fixed term is ending, our page on fixed rate expiry explains your options.

What to do if repayments are becoming difficult

Contact your lender early, preferably before you miss a payment, because you'll usually have more options.

1. Contact your lender early, preferably before missing a payment.
2. Tell the hardship team what changed, how long it may last and what you can afford.
3. Know your rights. A lender must give a written outcome on a hardship request within 21 days. A hardship arrangement won't affect your credit score, but it appears on your credit report for 12 months. Ask how any arrangement affects interest and total cost.
4. If a request is refused, the lender must give a reason. You can use the lender's dispute process and then contact the Australian Financial Complaints Authority (AFCA).
5. Check income protection insurance, including cover through super, and ask utility providers about hardship options.
6. Get confidential support at no cost: National Debt Helpline 1800 007 007; Mob Strong Debt Help 1800 808 488 (for Aboriginal and Torres Strait Islander people); Beyond Blue 1300 22 46 36 (24 hours).

Plan for a gap between contracts or a redundancy, because losing income can hit harder than a rate rise.

Small steps taken early can give you more options later. Book an appointment at a time that suits you, and bring a recent loan statement, payslips or contracts.

This article is general information only and doesn't consider your personal circumstances. All lending, including any LMI waiver, is subject to lender criteria and credit approval. Speak with your accountant about tax.

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