As discussed in our update earlier in the week, the RBA surprised many by holding the cash rate steady at 3.85%, despite widespread expectations of a cut. The decision, made on Tuesday, left many in the market and broking industry disappointed, especially with inflation showing signs of easing.
However, leading bank economists remain confident that relief is on the way, doubling down on their forecasts for an August rate cut, with more to follow.
The next RBA decision is due on 12 August, following the release of key economic data, including quarterly inflation figures at the end of this month. If there is one thing we should have learnt about the RBA over the past few years, it is not to bet the house on what their next move will be!
In this week’s newsletter, we look at how different types of funding arrangements for cars can have different impacts on home loan applications.
As of mid 2025, the average car loan amount in Australia is approximately $33,500. For new cars, the average loan amount is around $46,500, while for used cars, it’s about $28,000.
In terms of repayments, the average monthly car loan payment across Australia is circa $900, so it’s understandable that home lenders take a car debt seriously when assessing a home loan application.
Different types of car loans can have varying impacts on a person’s ability to get a home loan, particularly when it comes to how they affect borrowing capacity, and how lenders assess your debt-to-income ratio and monthly commitments.
Secured vs. Unsecured Car Loans
Secured car loans (where the car is collateral) usually have lower interest rates and fixed repayments, which can appear more stable and manageable to a lender.
Unsecured car loans (no asset backing) often come with higher interest rates, suggesting higher risk and potentially reducing your borrowing power more significantly.
Personal Loans Used for Vehicles
If you’ve financed your car through a personal loan rather than a traditional car loan, this can raise more questions during a home loan assessment. Lenders may view personal loans as less structured or less predictable, especially if they’re recent or high in value.
Novated Leases or Salary-Sacrificed Car Finance
These can affect your serviceability in different ways:
- Lower taxable income can reduce your borrowing power, but no direct repayments on your credit file may soften the impact, depending on the lender’s policy.
- Lenders assess novated leases differently, some count the full lease amount as an expense; others may discount it.
Outstanding Loan Balance vs. Monthly Repayments
Lenders focus less on the total car loan amount and more on the monthly repayment, as it directly affects how much of your income is available to service a mortgage.
So in summary it’s not just the monthly repayments that are an important consideration for home lenders, it’s also the type of loan, the loan balance, and structure of a car loan that matters.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
