---
title: How the RBA Cash Rate Affects Your Mortgage | GNT Finance
description: Does the RBA cash rate affect your mortgage? How variable and fixed rates respond, what a 0.25% move costs on a $500k to $800k loan, and what to do next.
url: https://gntfinance.com.au/guides/rba-cash-rate-and-your-mortgage/
section: guides
updated: 2026-09-01
author: Gorakh Timilsina, GNT Finance
---

# The RBA cash rate and your mortgage: what actually changes when the RBA moves

**In short:** Yes. The RBA cash rate is the benchmark banks use to price variable home loans, so when the RBA moves, most variable rates follow within weeks, though not always by the same amount. Fixed rates are priced off bond and swap markets and often move before the RBA does. Each 0.25% change costs or saves about $80 a month on a $500,000 loan and about $130 on $800,000.

This guide explains the plumbing between the Reserve Bank and your home loan, puts dollar figures on each move, and sets out what to do before the next meeting. We do not quote today's cash rate here; check the current figure at [rba.gov.au](https://www.rba.gov.au/).

## What the cash rate is

The cash rate is the interest rate on overnight loans between banks, set as a target by the Reserve Bank of Australia. It is the base cost of money in the system, and almost every other rate, from term deposits to your home loan, is built up from it. The RBA moves it to keep inflation within its 2–3% target band: raising it makes borrowing dearer and slows spending; cutting it does the opposite.

### Eight meetings a year

Since 2024 the RBA board meets eight times a year, roughly every six weeks, instead of the old eleven. Decisions are announced at 2:30 pm Melbourne time on the second day of each two-day meeting, and the dates are published a year ahead.

## How banks fund your loan

A lender does not borrow from the RBA at the cash rate and lend it to you. It funds home loans from a mix of sources, each with its own price.

| Funding source | Roughly what it is | How closely it tracks the cash rate |
|---|---|---|
| Customer deposits | Savings accounts, term deposits, offset balances | Loosely; banks decide how much of a move to pass to savers |
| Short-term wholesale funding | Bank bills priced off the bank bill swap rate (BBSW) | Closely, within days |
| Long-term wholesale funding | Bonds issued locally and offshore, often 3–5 years | Partly; also driven by global bond markets and the bank's credit spread |

Because only some of that funding reprices with the cash rate, a lender's overall cost of funds can move by less than, or more than, each RBA step. That is the first reason variable rates do not move one-for-one every time.

## Variable rates: they follow, but not one-for-one

A variable-rate home loan is priced at the lender's discretion; no law ties it to the cash rate. In practice, lenders announce their response within days and the new rate takes effect one to three weeks later for existing customers. Rises tend to be passed on in full and quickly. Cuts are sometimes passed on in full, sometimes partially, and occasionally late while the lender protects its margin.

### Out-of-cycle moves

Lenders can also change variable rates when the RBA has done nothing, usually citing funding costs. Your lender may have quietly lifted your rate while advertising a lower one to new customers. Our [when to refinance](/guides/when-to-refinance/) guide shows how to spot the gap.

## Fixed rates: priced before the RBA moves

When a lender offers you three years fixed, it hedges that commitment in the swap market, where banks trade fixed-for-floating interest over set terms. Swap rates reflect what the market expects the cash rate to average over those years, not where it sits today. That is why fixed rates often move before an RBA decision: if markets start pricing in cuts, fixed rates fall weeks or months ahead of the first actual cut, and the best deals are often gone by announcement day. The reverse happens ahead of rises.

| | Your variable rate | Your fixed rate |
|---|---|---|
| What sets it | Lender's discretion, guided by cash rate and funding costs | Locked at the rate you signed, priced off swap markets |
| Changes when the RBA moves | Usually within 1–3 weeks | No. It is fixed for the term |
| What happens at the end of the term | Not applicable | Reverts to the lender's standard variable rate, which is often not competitive |

If the RBA cuts while you are fixed, you keep paying the fixed rate until expiry, and leaving early triggers break costs to cover the lender's hedging loss. Our guide on [breaking a fixed-rate loan](/guides/breaking-a-fixed-rate-loan/) explains how those are calculated, and [fixed vs variable rate](/guides/fixed-vs-variable-rate/) weighs the trade-offs in full.

## What a 0.25% move does to your repayment

The RBA usually moves in 0.25 percentage-point steps. Here is what each step means on a 30-year principal-and-interest loan, using rates for illustration.

| Loan amount | 5.75% p.a. | 6.00% p.a. | 6.25% p.a. | Change per 0.25% step |
|---|---|---|---|---|
| $500,000 | $2,918 | $2,998 | $3,079 | About $80 a month |
| $650,000 | $3,793 | $3,897 | $4,002 | About $105 a month |
| $800,000 | $4,668 | $4,796 | $4,926 | About $130 a month |

Monthly repayments, rounded. Run your own loan through the [mortgage repayment calculator](/calculators/mortgage-repayment/) for exact figures.

### Cumulative effect of 1.00%

Four steps in the same direction add up quickly, because each rise is calculated on the full remaining balance.

| Loan amount | 5.00% p.a. | 6.00% p.a. | 7.00% p.a. | Cut of 1.00% saves | Rise of 1.00% adds |
|---|---|---|---|---|---|
| $500,000 | $2,684 | $2,998 | $3,327 | $314 a month ($3,768 a year) | $329 a month ($3,948 a year) |
| $650,000 | $3,489 | $3,897 | $4,325 | $408 a month ($4,896 a year) | $428 a month ($5,136 a year) |
| $800,000 | $4,295 | $4,796 | $5,323 | $501 a month ($6,012 a year) | $527 a month ($6,324 a year) |

## Serviceability: lenders already test you for rises

When a lender assesses a new loan or refinance, APRA requires it to check you could still make repayments at your rate plus 3 percentage points. At 6.00%, for illustration, you are assessed at 9.00%, so on an $800,000 loan you must show you could afford well above the $4,796 you will actually pay.

That gives a well-assessed borrower a built-in cushion. It also means that after rises, some people can no longer refinance because they fail the buffer at the new rate, even though they pay their existing loan without trouble. If you are near that line, refinance before a rise, not after. Our [refinance calculator](/calculators/refinance/) shows what a move would save today.

## Do banks pass on cuts in full, and when

Nothing compels a lender to pass on a cut. Most pass on the full amount to variable-rate customers, partly because of public pressure and partly because competitors will. But a cut announced on a Tuesday often does not reach your account for two to three weeks.

### The repayment lag

When your variable rate falls, many lenders do not automatically reduce your direct debit. They keep your repayment the same and apply more of it to principal. That pays the loan off faster, but if you want the cash-flow relief you need to ask the lender to recalculate the minimum. Rises are almost always applied automatically.

## What to do before a decision

You have more options before an RBA meeting than after one.

- **Review your rate against the market.** If your variable rate is more than 0.30% above what your lender offers new customers, ask for a reduction.
- **Consider a split loan.** Fixing part of the loan gives certainty on that portion while keeping an offset and unlimited extra repayments on the rest. The [split loan calculator](/calculators/split-loan/) models the mix.
- **Use your offset.** Every dollar in offset saves interest at your loan rate, tax-free, whatever the RBA does. See [offset vs redraw](/guides/offset-vs-redraw/).
- **Refinance if the gap is real.** A competitive rate now beats a hoped-for cut later. Our [refinancing guide](/guides/refinancing-guide/) covers costs, timing and what lenders need.

## Worked example: a Preston couple and a split loan

Anjali and Tom own a house in Preston with a $650,000 loan at, for illustration, 6.00% p.a. variable, so they pay $3,897 a month. Markets are divided on whether the next RBA moves will be up or down, and they want to sleep at night without giving up their offset. They split the loan 50/50: $325,000 fixed for two years at 6.00%, and $325,000 variable at 6.00% with a 100% offset. Their combined repayment stays at $3,897.

- **If variable rates rise 1.00% over the next year**, only the variable half moves. A fully variable $650,000 loan would climb to $4,325 (up $428). Their split rises to about $4,111 (up $214). The fixed half absorbs the other half of the shock.
- **If variable rates fall 1.00%**, a fully variable loan would drop to $3,489 (down $408). Their split falls to about $3,693 (down $204). They give up half the benefit in exchange for the certainty.
- Their $40,000 in savings sits in the offset against the variable half, saving about $2,400 a year in interest whatever the RBA does.

The split does not try to beat the market; it shrinks the range of outcomes. A [Preston mortgage broker](/mortgage-broker/preston/) at GNT Finance can price the fixed portion across multiple lenders rather than only the one you are with.

## Checklist before the next RBA meeting

- Compare your current variable rate to your lender's advertised new-customer rate.
- Confirm whether your lender reduces repayments after a cut automatically, or only on request.
- If you have a fixed rate, diarise a review three months before expiry.
- Decide in advance what you will do on a hold, a cut or a rise.
- Book a rate review if you have not had one in the last 12 months.

## Common mistakes

- **Fixing purely to chase forecasts.** Cash-rate predictions are wrong often enough that betting your loan on them is unwise. Fix for certainty you value, not to outguess a swap market that has already priced it in.
- **Waiting for cuts instead of refinancing now.** A borrower at 6.25% waiting for two cuts pays $105 a month more on $650,000 than a competitor's 6.00% customer today. Refinance now and enjoy any cuts on top.
- **Forgetting to ask the lender to reduce the repayment.** After a cut, many lenders leave your direct debit unchanged. If you need the cash flow, ask.
- **Fixing 100% of the loan.** You lose offset flexibility and the ability to refinance without break costs.
- **Assuming the reversion rate is fine.** Loans rolling off fixed onto the standard variable rate can jump well above the market.

## Frequently asked questions

### Does the RBA cash rate affect my fixed rate?

Not once it is locked in. Your fixed rate stays the same for the whole term regardless of what the RBA does. Before you fix, though, the outlook matters: lenders price fixed rates off swap markets that anticipate future RBA moves, so fixed rates typically rise or fall before the RBA acts. When your term ends, your loan reverts to a variable rate reflecting the cash rate at that time.

### How much does a 0.25% rate rise add to my mortgage?

On a 30-year principal-and-interest loan, a 0.25 percentage-point rise adds roughly $80 a month on $500,000, about $105 on $650,000 and about $130 on $800,000, based on rates around 6.00% for illustration. The exact figure depends on your current rate, remaining term and balance. Interest-only borrowers feel it more directly: on $500,000 interest-only, 0.25% adds about $104 a month.

### Do banks have to pass on RBA rate cuts?

No. Variable rates are set by each lender, and there is no legal requirement to match the RBA. In practice, competition and public scrutiny mean most lenders pass on the full cut to variable-rate customers, but timing varies (often two to three weeks) and partial pass-through happens when funding costs are rising. If your lender lags or passes on only part of a cut, compare the market.

### How soon after an RBA decision does my rate change?

Lenders generally announce their response within a day or two of the RBA decision, and the change takes effect for existing customers one to three weeks later. Your repayment is recalculated from that effective date. After a rise, your direct debit usually increases automatically. After a cut, some lenders leave your repayment unchanged and pay down more principal unless you ask them to lower the minimum.

### Should I fix my rate before the RBA meets?

Only if you value certainty at the price on offer. Fixed rates already reflect the market's expectation of RBA moves, so fixing "before a rise" rarely beats the market; the rise is usually priced in. Fixing makes sense when the fixed rate is competitive against variable, your budget cannot absorb rises, and you will not need to sell or refinance during the term. A split loan gives certainty without giving up all flexibility.

### How many times a year does the RBA meet?

Since 2024 the Reserve Bank board meets eight times a year, roughly every six weeks, with each meeting run over two days and the decision announced at 2:30 pm on the second day. The schedule is published in advance on the RBA website. Between meetings the cash rate does not change, though lenders can still move variable rates out of cycle.

## Talk to GNT Finance

Whatever the next RBA decision, the best time to review your loan is before it. GNT Finance can compare your rate against a wide range of lenders in one conversation, and our [refinancing service](/services/refinancing/) comes at no cost to you for our home-loan service in most cases. [Book a free consultation](/contact/) or call 0426 403 703.

*This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.*