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Insights · Rates

RBA moves the cash rate. Now what happens to your loan?

The RBA can move the cash rate by 0.25% in either direction. Whether your repayment moves by the same amount, less, or at all, depends entirely on the lender you're with — and how they decide to play the cycle. Here's the mechanics, lender by lender.

Reviewed · Adam King — 30 years in finance, Sunshine Coast

What the cash rate actually controls

The Reserve Bank of Australia sets the cash rate target — the overnight interest rate between banks. That number sets the floor for the price of money in Australia. When it moves, every lender's wholesale funding cost moves with it. The variable home loan rate sits a margin above that funding cost, and the margin is where each lender makes their call. For a borrower, that translates to two questions. First — will my lender pass the move on? Second — will they pass on all of it, or part of it? The headline RBA decision is reported in a single sentence. The pass-on decisions themselves play out over roughly one to four weeks across the panel of lenders we work with daily, and then a further billing lag before the changed repayment lands on your statement. What the cash rate is not is a guarantee. It's a signal. The relationship between cash rate moves and mortgage rate moves has held tight for decades, but it's not mechanical, and the gap between the RBA's announcement and your statement reflecting a new repayment can be anywhere from two weeks to eight.

How a 0.25% move typically lands

  • Monthly change

    $78

    Indicative — $600K loan, 25-year P&I, full pass-on; a cut saves it, a hike costs it

  • Typical delay

    5–8 wks

    From RBA announcement to first changed repayment

  • Pass-on by lender

    Varies

    Pass-on varies by lender and product — sometimes full, sometimes partial

  • Lenders on panel

    60+

    Each making their own call file by file

Who passes it on quickly — and who drags

The major banks usually move first and announce within hours of the RBA decision. Pass-on varies by lender and product — in the recent easing cycle most lenders passed cuts on in full, but in sharper cycles some have passed on only part of a move to defend their net interest margins, and there's no rule that obliges a lender to match the RBA. A cash-rate move typically lands on your variable rate twelve to twenty-eight days after the announcement, depending on which side of their monthly billing cycle you sit. The second-tier banks move within a week or two. Some are usually fast and full; others are competitive but their timing varies. The specialist non-bank lenders often follow last, sometimes pricing more conservatively because their funding sources are different to the deposit-funded majors. None of this is a criticism — it's just the structural reality of how each balance sheet is built. What we watch for, post-announcement, is the relative gap. A lender that doesn't pass on a favourable move to existing customers may quietly adjust new-business pricing the same week. That's the moment a refinance review pays for itself. The cohort that has been on the same loan for three years is the one most likely to be sitting on a stale rate.

Practical implication

Rate moves expose the gap between front and back book.

A cut is good news for everyone on a variable rate, but the gap between what your lender charges new customers vs what you're paying can widen during easing cycles. A hike can expose the same problem in reverse if your lender lifts existing-customer pricing faster than new-business discounts. Either way, a rate review six to eight weeks after a move is when the gap is most visible.

If your fixed rate is rolling off in the next twelve months

This is the cohort that needs the closest read on the cycle. A two- or three-year fixed taken near the top of the last rate cycle is likely sitting near peak — five-point-something for owner-occupied principal-and-interest, six-something for investment interest-only. The variable revert rate your bank quietly drops you to once that fixed expires is usually their standard variable rate, which is among the worst rates in their book. Three to four months out from your fixed expiry is the window to start the conversation. That's enough time to assess current variable pricing, model a fix-now versus float-and-watch scenario, and — if it's the right call — refinance to another lender at a sharper rate without rushing. Leaving it until the week before expiry is the most expensive option. The lender knows you've got no time, and they price accordingly. For borrowers fixed beyond that — say, a fixed loan with roughly 18 months to two years remaining — break costs are the question. The break cost calculation is the wholesale-rate differential multiplied by the remaining fixed term. If wholesale rates have fallen materially since you fixed, the break cost can be high. Sometimes the saving from breaking and going variable still wins, particularly if you're paying a heavy premium. The only way to know is request the formal break quote in writing and run the maths both ways.

What to do this month, depending on your position

Pick the row that fits your situation. The actions are simple. Most borrowers don't take them, which is why most borrowers overpay.

  • Variable rate, no review in 12+ months: call your lender and ask for a retention rate. Compare against the market. If the gap is over 0.25%, you're a refinance candidate.
  • Variable rate, recently reviewed: hold and watch. The next move may widen the gap again — that's when to look.
  • Fixed expiring within 6 months: start the comparison now. Don't accept the revert rate by default. Three months is the practical lead time for a clean refinance.
  • Fixed with more than 12 months remaining: request a break-cost quote, model both paths, decide on the data not the headline.
  • First-home buyer pre-approved: ask your broker how the lender's serviceability assessment changes if the cash rate moves — some lenders update buffer calculations on cycle, others don't.

The mistake I see most often

Borrowers assume their lender will simply pass on the RBA move and that's the end of it. They check their statement six weeks later, see a changed repayment, and feel like the lender did them a favour. They didn't. The lender's product and pricing function prices the back book — existing customers on higher rates — separately from new-business pricing, so loyal customers can sit on a stale rate while sharper front-book rates move around them. The single best thing a borrower on a variable rate can do during an active rate cycle is review their rate every six months against the live market — usually a quick phone call to the lender, not a formal written process. That's it. Not a wholesale refinance every six months — just a check. Half the time the review confirms you're sitting fine. The other half, there's $1,500 to $4,000 a year on the table. If you want to read the RBA's own commentary on monetary policy and how it transmits through to lending rates, the Bank publishes a clear plain-English explainer at rba.gov.au under 'About monetary policy'. APRA's prudential standards on variable-rate lending sit at apra.gov.au if you want to go further.

From the practice

A rate review costs nothing and takes twenty minutes.

We don't refinance for the sake of it. Roughly one in three reviews we run ends with 'stay where you are, your rate is still sharp'. That's a useful outcome too. The discipline is in the looking.

Questions you might have

The honest answers.

Real numbers · honest answers

Where does your loan really sit *now?*

Twenty-minute call. We'll pull your current rate, compare against the live panel after the latest RBA move, and tell you straight if there's a worthwhile move. No move, no fee.

Keep reading

General information only — not personal credit advice. Figures are indicative and subject to confirmation against current lender pricing and policy.