Interest Rates Are Rising. But Are They Solving the Real Problem?

Introduction

When the Reserve Bank of Australia raises interest rates, the idea is simple. Higher borrowing costs lower spending. Less spending reduces demand. Slower demand should help control inflation.

On paper, it makes sense. But in the real world, things are rarely that straightforward.

For many Australians, rising interest rates haven’t fixed inflation. Instead, they’ve increased mortgage repayments, decreased borrowing power, and made it harder for first home buyers to get into the property market.This raises an important question. Are higher interest rates actually addressing the root cause of inflation, or are they simply placing additional pressure on borrowers?

Expert Commentary From Spiro Kolokithas

Spiro Kolokithas, Managing Director of What If We Finance, a Melbourne mortgage broker, believes that recent increases in interest rates highlight the limitations of monetary policy, such as its inability to address rising housing costs or inflation driven by external factors.

“Interest rates are a blunt instrument. They can slow borrowing, but they cannot fix geopolitical shocks or global supply disruptions. Yet borrowers are often the ones carrying the financial burden.”

Inflation Is Not Always Driven by Borrowers

Traditional economic thinking suggests that inflation occurs when consumers borrow and spend excessively, leading to higher demand and prompting interest rate hikes. However, much of the recent global inflation has been driven by factors beyond Australia’s control. These include supply chain disruptions caused by the COVID‑19 pandemic, fluctuations in energy prices following the Ukraine war, labour shortages across various industries, and global shipping challenges.

Why Mortgage Borrowers Often Carry the Burden

Interest rate increases impact various groups of Australians differently. Mortgage holders notice their repayments increase quickly. First home buyers see less borrowing capacity. Property investors face increased lending costs.

The Hidden Cost Many Borrowers Overlook

One of the greatest financial dangers homeowners face today is a rarely discussed issue called the loyalty tax.

While banks compete fiercely to attract new clients with attractive rates, current borrowers often stay on their original, often higher, rates unless they actively review or refinance their mortgage.

Why a Mortgage Broker Matters in a Rising Rate Environment

When interest rates change rapidly, the difference between lenders can grow substantial. Some lenders raise their rates faster than others, and some offer attractive refinancing incentives. In such situations, a mortgage broker can offer valuable market insights. Instead of representing just one bank, mortgage brokers compare offerings from multiple lenders. At What If We Finance, the team reviews over 50 banks and lenders to assist borrowers in finding the most suitable home loan options.

First Home Buyers Facing a Changing Market

For first-time home buyers, rising interest rates have made entering the property market more difficult. In many cases, borrowing capacity has decreased, so buyers need to plan carefully and understand lender policies before making a purchase.

Why a Home Loan Health Check Matters

A home loan health check can help borrowers assess if their mortgage stays competitive and spot opportunities to refinance, lower interest costs, or restructure their loan.

Focus on What You Can Influence

Borrowers cannot influence global inflation or what the central bank decides. What they can control is whether their home loan stays competitive and well-structured.

About Spiro Kolokithas

Spiro Kolokithas is the Managing Director of What If We Finance and an experienced Melbourne mortgage broker who helps first home buyers, homeowners, and property investors find competitive lending solutions.

About What If We Finance

What If We Finance is a leading Melbourne mortgage broker that compares over 50 banks and lenders to help clients find suitable home loan options. The firm has earned more than 280 five-star client reviews and was awarded Best Customer Service in Victoria at the MFAA Awards 2024, also being recognised as a finalist in the 2025 mortgage industry awards. 

Frequently Asked Questions

Refinancing a home loan can help borrowers secure a more competitive interest rate or better loan structure. Many borrowers remain on older rates without realising better options exist. A mortgage broker can compare lenders and determine whether refinancing may reduce interest costs.

A mortgage broker compares lenders across the market to help borrowers find suitable home loan options. They assist with first home buyer loans, refinancing, loan structuring and negotiating competitive interest rates. 

A home loan health check every few years can help ensure your interest rate remains competitive and that you are not paying unnecessary interest.

Yes. Mortgage brokers help first home buyers understand borrowing capacity, deposit requirements, lender policies and government support schemes before purchasing a property.

A home loan health check reviews an existing mortgage to determine whether the interest rate, lender and loan structure remain competitive. It may identify opportunities to refinance or reduce costs.