Key takeaways
A cash rate rise can lead to higher variable home loan rates, but each lender decides if, when and how much to pass on.
Fixed-rate repayments generally stay the same until the fixed term ends, even if the cash rate moves.
A 0.25 percentage point increase could lift monthly repayments, with the impact depending on your loan balance and term.
Knowing your current rate and running the numbers can help you prepare and understand what options may be available.
When the cash rate moves, you might wonder what it means for your home loan and, importantly, your repayments.
If you have a variable-rate home loan, a 0.25 percentage point cash rate rise could lead to a higher interest rate and higher repayments if your lender passes the increase on. If you’re on a fixed rate, your repayments will generally stay the same until your fixed term ends.
So, what could a rate rise actually mean for your mortgage? Let’s break down how the cash rate changes work, what they could mean for your repayments, and some practical steps you can take.
What is the cash rate and why does it change?
The cash rate is one of the RBA’s main tools for influencing the Australian economy. When it changes, other interest rates can move too, including the rates lenders offer on home loans. You can read more about how the RBA explains cash rate changes flowing through the economy.
As of 22 September 2026, the RBA’s cash rate target is 4.35%, with the next monetary policy decision scheduled for 29 September 2026.
The latest ABS data showed annual inflation of 3.5% in the year to July 2026, while trimmed mean inflation was 3.6%. Inflation is one of several economic conditions the RBA considers when deciding where to set the cash rate.
What happens to my home loan when the cash rate rises?
If you have a variable-rate home loan, a cash rate rise could lead to a higher home loan rate. But that doesn’t necessarily mean your rate will increase by exactly the same amount.
The RBA doesn’t set your individual home loan rate. Each lender decides whether to pass on a cash rate change, how much to pass on and when. Other factors, including funding costs, competition and loan risk, can also influence home loan rates.
If your lender does increase your variable rate, your required repayments could go up and more of each repayment could go towards interest.
How much your repayments change will depend on factors such as your loan balance, interest rate, remaining loan term and repayment type.
That’s why it’s worth checking any notice from your lender rather than assuming exactly how a cash rate move will affect your loan.
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How much could a 0.25 percentage point increase add to repayments?
Even a seemingly small change in interest rates can make a difference to your monthly repayments.
The example below shows what could happen if the interest rate on a principal and interest home loan with a 30-year term increased from 6.62% p.a. to 6.87% p.a.
These are indicative average rates only and aren’t a quote for a particular home loan.
Loan amount | Current monthly repayment at 6.62% | Monthly repayment at 6.87% | Monthly increase | Yearly increase |
|---|---|---|---|---|
$400,000 | $2,560 | $2,626 | $66 | $792 |
$500,000 | $3,200 | $3,283 | $83 | $996 |
$600,000 | $3,840 | $3,940 | $100 | $1,200 |
$700,000 | $4,480 | $4,596 | $116 | $1,392 |
$800,000 | $5,120 | $5,253 | $133 | $1,596 |
$900,000 | $5,760 | $5,909 | $149 | $1,788 |
$1,000,000 | $6,400 | $6,566 | $166 | $1,992 |
$1,250,000 | $8,000 | $8,207 | $207 | $2,484 |
$1,500,000 | $9,600 | $9,849 | $249 | $2,988 |
For example, on a $500,000 loan, repayments could increase by around $83 a month in this scenario. Your actual repayment change could be different.
Want to see what a rate change could look like for your own home loan? Try our Mortgage Repayment Calculator and test different interest rates, loan terms and repayment frequencies. The calculator provides an estimate, not a lending decision.
Could refinancing to a lower rate reduce my repayments?
If rates are moving up, it can be a good prompt to check how your current home loan stacks up.
If you qualify for a lower rate, refinancing could reduce your repayments, provided the overall cost of switching makes sense for you.
The example below compares monthly repayments at 6.62% p.a. with a rate 0.25 percentage points lower, at 6.37% p.a. It assumes the same loan balance, principal and interest repayments and a 30-year loan term.
Loan amount | Monthly repayment at 6.62% | Monthly repayment at 6.37% | Monthly saving | Yearly increase |
|---|---|---|---|---|
$400,000 | $2,560 | $2,495 | $65 | $780 |
$500,000 | $3,200 | $3,118 | $82 | $984 |
$600,000 | $3,840 | $3,742 | $98 | $1,176 |
$700,000 | $4,480 | $4,366 | $114 | $1,368 |
$800,000 | $5,120 | $4,989 | $131 | $1,572 |
$900,000 | $5,760 | $5,613 | $147 | $1,764 |
$1,000,000 | $6,400 | $6,237 | $163 | $1,956 |
$1,250,000 | $8,000 | $7,796 | $204 | $2,448 |
$1,500,000 | $9,600 | $9,355 | $245 | $2,940 |
Of course, there’s more to refinancing than the interest rate alone. Fees and other switching costs can affect whether refinancing leaves you better off overall.
If you’re not sure where to start, an Aussie Broker can help you review your current home loan and compare the options available to you.
You might also be interested in: Refinancing is evolving – Australians are doing more than just switching rates
What happens if the cash rate is held?
If the RBA holds the cash rate, it means the target stays unchanged for that particular decision.
For variable-rate borrowers, that may mean a break from a cash-rate-driven change to their home loan rate. But a cash rate hold doesn’t guarantee that every lender will keep its rates unchanged.
Lenders can still adjust home loan rates in response to factors such as funding costs, competition, and other commercial considerations.
So, even when the cash rate stays put, it’s worth keeping an eye on your actual home loan rate and repayments.
What happens if the cash rate falls?
A cash rate cut can lead to lower variable home loan rates, although lenders decide whether to pass on a cut and how quickly.
If your variable home loan rate falls, your required repayments could come down. Depending on your circumstances, you may also choose to keep making the same repayment amount, which could help you pay your home loan off sooner.
If you’re on a fixed rate, your home loan rate will generally stay the same for the rest of your fixed term. New fixed rates can still move as lenders respond to funding costs and expectations about future interest rates.
Whatever the RBA decides, checking your actual rate and repayment can help you understand what the change means for you.
You might also be interested in: More homeowners are accessing equity when refinancing
What does a rate change mean for fixed-rate borrowers?
If your home loan is fixed, a cash rate rise or cut usually won’t change your interest rate or scheduled repayments during the fixed period.
The bigger consideration is what happens when your fixed term comes to an end. At that point, you may move onto a variable rate or choose another fixed-rate option.
Knowing your fixed-rate expiry date ahead of time gives you a chance to understand what rate may apply next and explore your options before anything changes.
An Aussie Broker can also help you look at what’s available as you get closer to the end of your fixed term.
Can a cash rate rise reduce my borrowing power?
It could.
When interest rates rise, the repayments used in a lender’s borrowing power assessment can also increase. That may reduce how much a lender is prepared to approve.
But interest rates are only part of the picture. Your income, living expenses, existing debts, dependents, and the lender’s own assessment criteria can all affect your borrowing power. Different lenders can also produce different estimates.
If you’re planning your next property move, our Borrowing Power Calculator can give you an estimate and help you understand some of the factors that may affect how much you could borrow.
For a closer look at your situation, an Aussie Broker can talk you through your options.
You might also be interested in: Refinancing myths that could be costing you
What should I do if a rate rise is putting pressure on my budget?
If higher repayments are starting to squeeze your budget, a useful first step is to get a clear picture of where your home loan currently stands.
Check your interest rate, repayment amount, loan balance and remaining term. You can then use our Mortgage Repayment Calculator to see how a higher rate could change your repayments.
It may also be worth reviewing your home loan. If you qualify for a lower rate, refinancing could reduce your repayments but remember to weigh up any potential savings against costs such as discharge, application, valuation or fixed-rate break fees.
An Aussie Broker can help you review your home loan and understand the options available to you.
And if you’re worried you may struggle to meet your repayments, it’s important to contact your lender early to discuss your situation.
What are the banks currently predicting?
Interest rate forecasts can give us an indication of what economists expect, but they’re still forecasts. They can change as new inflation, employment and other economic data becomes available.
As of 22 September 2026, ANZ, Commonwealth Bank, NAB and Westpac were reported as expecting a 25-basis point increase at the RBA’s 29 September decision. If that happened, the cash rate would rise to around 4.60%.
Ready to review your home loan?
There can be a lot to take in when interest rates are changing. The good news is you don’t have to make sense of your home loan on your own.
A good place to start is by checking your current interest rate and using our Mortgage Repayment Calculator to see what different rates could mean for your repayments.
And if you’d like some help looking at the bigger picture, your local Aussie Broker can review your home loan and help you understand the options available to you.
Ready to get started? Book an appointment with an Aussie Broker and let’s take a look at your home loan.
