RBA rate rise: Borrowers struggling to pay mortgage costs

Australians are bracing for a final rate rise of the year on Tuesday, with experts predicting a jump of 25 basis points to a cash rate of 3.1 per cent.

Mortgage stress has become the top presenting issue to the National Debt Helpline in recent months, with experts sharing tips on what to do when you can't afford to pay your mortgage.

Some lenders are passing on more than the RBA's rate hikes, and after a year of relentless rate rises, a quarter of borrowers are living paycheck to paycheck.

"Households are really battling to pay their mortgages," Mozo personal finance expert Claire Frawley said.

"Most borrowers were not expecting rate rises to kick in until late 2024, but this final push from the RBA means that most mortgage holders will experience a massive 300 basis point increase to their variable home loans this year."

The Reserve Bank of Australia recently received criticism over the rapid increase to cash rate in the Senate estimates.

Ms Frawley said banks use a variety of tactics in the wake of the rate hikes.

This week, ANZ cut variable rates for customers, after increasing them earlier in the month following the RBA's cash rate rise. In the past two months, seven other lenders have also cut rates after increasing them to follow the RBA cash rate increase.

Following the September rate increase, some lenders passed on more than the rate hike amount to customers, leaving less providers passing on just the rate hike amount.

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Ms Frawley said the Commonwealth Bank, Macquarie and St George have passed on different amounts to customers depending on their loan-to-value ratios (LVR). Customers with 60 per cent LVRs are only receiving a partial rate increase, while those with a 80 per cent LVR or higher are receiving the full rate hike amount.

"Lenders are rewarding customers who have paid off more of their mortgage and have a lower loan-to-value ratio. While this is good news for those with more equity in their homes, it doesn't help borrowers who have just taken on a mortgage," she said.

Data research company Mozo said the average variable home loan rate for owner occupiers is 5.41 per cent, which is 234 basis points higher than the average in January, which was 3.07 per cent.

If lenders pass on the 25 basis point rate increase, the average interest rate for a $500,000 mortgage will be 5.66 per cent. This means mortgage holders pay $3118 a month, up from $2220 at the start of the year when the cash rate was 0.10 per cent.