What the RBA Cash Rate Changes Mean for Your Mortgage Repayments

When the Reserve Bank of Australia (RBA) adjusts the cash rate, it can have a big impact on your home loan, especially if you’re on a variable rate. But what exactly is the cash rate, why does it change, and how does it affect your mortgage repayments?

What-the-RBA-Cash-Rate-Changes-Mean-for-Your-Mortgage-Repayments

What Is the RBA Cash Rate?

The cash rate is the interest rate the RBA charges commercial banks to borrow money. It’s one of the most important tools the RBA uses to manage inflation, consumer spending, and the overall health of the Australian economy.

When inflation is high, the RBA typically raises the cash rate to slow spending. When economic growth needs a boost, they may cut the rate to make borrowing cheaper and encourage investment.

What Happens When the Cash Rate Drops?

If the RBA lowers the cash rate, banks may follow suit by reducing their home loan interest rates, particularly for variable-rate loans. This can lead to:

  • Lower monthly repayments
  • More room in your budget to save or pay extra into your mortgage
  • Opportunities to refinance at a better rate

Example:
A 0.25% drop in the interest rate on a $600,000 loan could save you around $92 per month in repayments.

But keep in mind: not all banks pass on the full rate cut. That’s where a mortgage broker can help you compare your options.

What Happens When the Cash Rate Rises?

When the RBA increases the cash rate, variable loan rates tend to follow. This means:

  • Higher monthly repayments
  • Potential stress on household budgets
  • A need to reassess your loan structure

Even a few small increases can add hundreds to your repayments over time. If you’re feeling the squeeze, it’s a good idea to review your current setup, especially if you’re not on the most competitive rate.

How Do Fixed Rates Come Into Play?

If you’re on a fixed-rate loan, cash rate changes won’t affect your repayments until your fixed term ends. But it’s still smart to keep an eye on the market so you’re ready to refinance when the time comes.

Fixed loans offer repayment certainty, which can be helpful during times of economic uncertainty. However, if rates fall and you’re locked in at a higher rate, you may miss out on savings.

What You Can Do to Stay Ahead

Whether rates go up or down, here’s how to stay in control:

  • Review your loan regularly—don’t just “set and forget”
  • Compare lenders—some pass on changes faster or offer better features
  • Consider refinancing if your rate is no longer competitive
  • Look at loan features like offset accounts or redraw facilities to manage repayments smarter

Let’s Chat About Your Home Loan

Are you worried about how further increases might impact your repayments? Now’s the time to take action. Talk to one of our experienced mortgage brokers today! At BrokerCo, we’ll help you stay one step ahead, whatever the RBA decides next.

Related Articles