Every time the RBA meets, I get some version of the same question from clients: “if they move the cash rate 0.25%, what does that actually do to my repayment?” It’s a fair question, and the honest answer has more steps in it than most headlines let on.
With the next decision landing September 28-29, here’s the mechanics — not a prediction of which way it’ll go, just what happens to your numbers once it does.
The Cash Rate Isn’t Your Rate
The RBA sets the cash rate, which is the rate banks charge each other for overnight loans. Your variable home loan rate is priced off that, plus the bank’s own funding costs and margin. When the cash rate moves, banks usually pass some or all of it through to variable rates — but not always the full amount, and not always on the same day.
Fixed-rate borrowers don’t feel a cash rate move at all until their fixed term ends. That’s the whole point of fixing — you’re trading potential downside for certainty, and vice versa.
The Actual Dollar Impact
Take a $600,000 loan, 25 years remaining, principal and interest. A 0.25% rate change works out to roughly $90-100 a month either way, depending on where in the loan term you are (more impact early, since more of your repayment is interest at that stage).
That doesn’t sound dramatic on its own. The reason people feel it more than the math suggests is that rate moves tend to arrive in clusters, not isolation — three or four moves in a year adds up to real household budget pressure, especially stacked on top of everything else that’s gone up.
The Part People Miss: Timing
Your bank doesn’t have to move the day the RBA does, and different lenders pass changes through at different speeds. It’s worth checking your own loan’s rate change notice rather than assuming the news headline date is your date — I’ve seen clients budget around the RBA’s announcement and get caught out two or three weeks later when their actual repayment changes.
What To Actually Do About It
If you’re on variable and a rise happens
Check your new repayment amount directly with your lender rather than estimating. If it stretches your budget, this is the moment to look at whether refinancing, extending your loan term, or moving to interest-only for a short period makes sense — not six months into feeling the pinch.
If you’re deciding between fixed and variable right now
There’s no universally right answer — it depends on your risk tolerance and how tight your buffer is. I’ve written a full breakdown of that decision separately, since it deserves more than a paragraph here.
If a rise doesn’t change your budget either way
Consider directing the difference into an offset account rather than just absorbing it — it’s the cheapest insurance against the next move going the same direction.
Frequently Asked Questions
Does my bank have to pass on an RBA rate change?
No. Banks set their own variable rates and typically move in response to the cash rate, but they’re not obliged to pass on the full amount, or to do it immediately. Check your lender’s own notice rather than assuming.
How much does a 0.25% rate change cost on an average loan?
On a $600,000 loan with 25 years remaining, roughly $90-100 a month. The exact figure depends on your loan balance, remaining term, and where you are in the amortisation schedule.
Do fixed-rate borrowers feel RBA moves immediately?
No. A fixed rate is locked for its term regardless of what the cash rate does. The impact only arrives when the fixed term ends and the loan reverts to a variable rate or a new fixed term is set.
The Bottom Line
An RBA decision is a headline. Your actual repayment change depends on your lender’s pass-through, your loan structure, and where you sit in your loan term. Don’t budget off the announcement — budget off the letter your bank sends you.
Related Reading
- Why Rates Rose When Everyone Expected Cuts (And What Borrowers Should Do Now) — the broader rate cycle behind this decision
- Should You Refinance? The Simple Maths That Actually Answers It — what to do if a rate rise makes switching worth considering
- Negative Equity: What the Headlines Get Wrong About Who’s Actually at Risk — the other side of a rising-rate environment
