In an effort to stop soaring inflation, the RBA has had ‘no choice’ (in their eyes) but to push the cash rate to 4.10%, lifting the average new variable interest rate for owner occupiers from a low of 2.41% p.a. in April 2022 to 5.94% p.a. in June 2023.

In June, an estimated 1.43 million Aussies - nearly 29% of mortgage holders - were ‘at risk’ of mortgage stress according to Roy Morgan research.

That is half a million more than a year ago.

Even the average fixed-rate home loan is too high to offer borrowers much of a reprieve from rate hikes.

And with some lenders raising both variable and fixed rates over the last few weeks on their own terms, what other options are available?

Enter a capped-rate home loan.

How does a capped-rate home loan work?

A capped-rate home loan is a mortgage that has a built-in rate ceiling for a certain period of time, meaning no matter how much rates rise, the interest rate cannot surpass the cap.

To give you an idea, here’s an example:

Capt. Rate has a capped-rate home loan. The cap rate is 7% p.a. and the capped period is three years. 

Capt. Rate’s interest rate cannot go above 7% p.a. during the first three years of the loan, even if the RBA lifts the cash rate. 

Essentially, a capped-rate home loan is like a variable-rate home loan, but provides a barrier that prevents the interest from exceeding a certain point. You could think of it like a safety net.


Which lenders offer capped-rate home loans?

While capped-rate home loans are rare, one Australian customer-owned bank has recently launched one.

Northern Inland Credit Union’s (NICU) Capped Home Loan is designed with rate hikes in mind.

The loan has a rate cap of 6.04% p.a. (6.39% p.a. comparison rate*) for a three year period.

The loan’s features include a redraw facility (minimum redraw of $500) and a 100% offset account

Fees include a $600 establishment fee and $350 annual fee.

The Capped Home Loan product is available for mortgages with a loan-to-value ratio (LVR) of 90% or below on principal and interest repayments (P&I).

Owner occupiers and investors across Australia are eligible for the 6.04% p.a. capped loan.

NICU Credit Manager Wayne Hoppe said the product provides customers the best of both worlds.

“Your interest remains variable, but it is guaranteed not to rise above a set interest rate for a three year period,” Mr Hoppe said.

“If the cash reference rate reduces, then the interest on the Capped Home Loan also reduces to reflect our Dream Home Loan variable interest rate.

“There are also no break costs if your circumstances change.”

How does a capped-rate home loan compare to a fixed rate?

A fixed-rate home loan gives you the option to lock in or ‘fix’ your interest rate for a set period of time - typically between one and five years. During that set period, the interest rate will not change, even if rates go up or down. 

While you are protected if interest rates rise, you are unable to benefit from rate cuts.

By contrast, the interest rate on a capped-rate loan can drop. If the cash rate reduces, so too does your home loan interest rate.

Additionally, with a capped home loan, you have the option to make additional repayments, unlike a fixed-rate loan which typically does not offer flexible features like this.

Before applying for a home loan, ensure you assess your personal and financial circumstances to find the right fit for you.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

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