The RBA cash rate is the interest rate the Reserve Bank of Australia sets on overnight loans in the money market. It’s the lever the RBA uses to steer the economy — influencing everything from inflation to employment — and it’s the anchor for the rates lenders charge on home loans.
When the cash rate rises, your variable-rate mortgage repayments typically go up. When it falls, they should come down. But here’s the part that surprises many borrowers: the shift isn’t always immediate, and it’s rarely dollar-for-dollar. Your lender sets its own rates based on funding costs, competition, and its appetite for risk — not just the RBA’s decision. So a 0.25 percentage point cash rate cut doesn’t automatically mean your rate drops by exactly the same amount.
That gap is why tracking the cash rate alone won’t tell you exactly what your next minimum repayment will be. It does tell you which direction mortgage rates are headed and how fast the lending market is moving. That’s the real value of understanding the relationship — not trying to predict exact timing, but knowing what to watch.
How the cash rate flows through to your loan
The cash rate works through a chain reaction. The RBA adjusts the rate it pays on exchange settlement balances, which moves the cost of short-term funding for banks. That feeds into their standard variable rates, fixed-rate offers, and ultimately what they charge you.
Because banks use a mix of funding sources — deposits, wholesale debt, and securitisation — not every funding line shifts in lockstep with the cash rate. A lender may choose to absorb part of a rise to stay competitive or hold back part of a cut to protect its margin. You see this most clearly after a series of moves, when some lenders adjust by a few basis points less than the RBA’s change, or they stagger the repricing over several weeks.
Fixed-rate loans add another layer. They’re priced off market expectations of future rates, not just today’s cash rate. So a fixed rate can fall even when the cash rate hasn’t budged, or rise even after a cut, if markets think the next move will be up.
The comparison rate is the real cost you should check
When you compare loans, it’s tempting to fixate on the headline interest rate. But the law requires lenders to show a comparison rate as well — a single percentage that bundles the interest rate with most upfront and ongoing fees. It’s a truer cost measure, and it’s especially useful when a loan offers a low introductory or honeymoon rate.
CashRate surfaces that figure alongside the interest rate for every tracked loan. That’s because a loan with a rate that’s 0.3 percentage points lower but loaded with monthly fees can cost you more than a plain product with a slightly higher rate. The comparison rate helps you see past the discount sticker.
What you can realistically do
RBA decisions move markets, but your own loan terms are the ones that matter at your kitchen table. Here are three practical steps that sit entirely inside the facts:
- Check your current rate and comparison rate. Even if you’re not switching, knowing your position lets you measure any change against your lender’s advertised offers — not just the RBA announcement.
- Distinguish fixed and variable portions. If you’re on a split loan, a cash rate change hits only the variable slice. The fixed portion remains locked until your term expires, and your decision window then is about negotiating the next rate or refinancing.
- Use the Moneysmart mortgage calculator. The calculator lets you stress-test your repayments if rates were to move higher by, say, two percentage points. It’s a sense check, not a prediction, but it builds a buffer into your thinking.
CashRate publishes rate data and methodology so you can see exactly what’s changing across lenders. We don’t lend money, we don’t promise a particular rate outcome, and we don’t give personal financial advice. The information on this site is general in nature and doesn’t account for your personal circumstances. Before you make any financial decision, consider whether the information fits your situation and talk to a qualified financial adviser or mortgage broker.