The RBA Cash Rate and Your Mortgage: What Rate Changes Mean for You

23/4/2026

The Reserve Bank's cash rate directly affects what you pay on your home loan. With the rate at 4.10% and the next decision due in May 2026, here is how the cash rate works, how it flows through to your mortgage, and what you can do to prepare for what comes next.

Every time the Reserve Bank of Australia announces a cash rate decision, the immediate question for millions of Australian mortgage holders is the same: what does this mean for my repayments?

The answer depends on whether you are on a fixed or variable rate, which lender you are with, and how your loan is structured. But the mechanics of how the cash rate flows through to your mortgage are worth understanding, because they affect the biggest recurring expense most households carry.

What Is the Cash Rate?

The cash rate is the interest rate on unsecured overnight loans between banks. It is the rate the RBA targets through its monetary policy operations, and it serves as the benchmark for virtually all other interest rates in the Australian economy.

When the RBA raises the cash rate, it becomes more expensive for banks to borrow money from each other. Banks pass this increased cost on to their customers through higher lending rates. When the cash rate falls, the reverse happens.

As of April 2026, the cash rate target is 4.10%, following two consecutive 25-basis-point increases in February and March 2026.

How Cash Rate Changes Flow to Your Mortgage

Variable Rate Loans

If you are on a variable rate, cash rate changes typically flow through to your mortgage rate within days to weeks. Most lenders pass on the full amount of any RBA increase, though they are not required to.

When the RBA raised the cash rate by 25 basis points in March 2026 (from 3.85% to 4.10%), the major banks passed the increase through in full, with most making the new rate effective within two weeks.

On a $500,000 variable rate loan, a 25-basis-point increase adds approximately $80 to your monthly repayment. Over two increases (50 basis points total in early 2026), that is roughly $160 per month, or nearly $2,000 per year.

Fixed Rate Loans

If you are on a fixed rate, cash rate changes do not affect your repayments during the fixed period. Your rate is locked regardless of what the RBA does.

However, fixed rates are not set based on the current cash rate. They are priced based on where the market expects the cash rate to be over the fixed period. This is why fixed rates can be higher or lower than variable rates at any given time. When the market expects rates to rise, fixed rates tend to be higher than variable rates (because they are pricing in future increases). When the market expects rates to fall, fixed rates may be lower.

If your fixed rate period is approaching its end, you need to plan for the revert rate. When a fixed rate expires, most lenders move you to their standard variable rate, which is often not competitive. This is one of the most important moments to talk to your broker about refinancing or renegotiating.

Split Loans

If you have a split loan (part fixed, part variable), the variable portion is affected by cash rate changes while the fixed portion is not. This is one of the reasons split loans are popular in uncertain rate environments: they limit your exposure to rate increases while maintaining some benefit from potential future decreases.

The Recent Rate Journey: 2022 to 2026

Understanding where we have been helps contextualise where we are.

The RBA began raising the cash rate in May 2022 from a record low of 0.10%, ultimately reaching a peak of 4.35% by November 2023. Rates held steady through 2024, then the RBA cut three times in 2025, bringing the rate down to 3.60%.

In early 2026, inflation picked up again, driven by stronger-than-expected private demand, a tight labour market, and rising energy prices linked to geopolitical tensions. The RBA responded with two 25-basis-point increases in February and March, taking the rate to 4.10%.

The March 2026 decision was a close call: five board members voted for the increase, four voted to hold. This split suggests the board is not unified on the direction of travel, which makes the May 2026 decision genuinely uncertain.

What Comes Next?

As of April 2026, expert opinion is divided:

  • Some economists expect the RBA to raise again in May, potentially to 4.35% (matching the 2023 peak), particularly if March quarter inflation data shows continued price pressures.

  • Others expect the RBA to hold and wait for more data, noting that the four dissenting board members in March were not calling for cuts but were cautioning against moving too fast.

  • Rate cuts in 2026 appear unlikely based on current RBA guidance and inflation forecasts. The RBA's own projections do not see trimmed mean inflation returning to the middle of the target band until mid-2028.

The honest answer is that nobody knows with certainty what the RBA will do next. Anyone who claims otherwise is selling something.

What You Can Do to Prepare

If You Are on a Variable Rate

Know your buffer. Calculate how much additional repayment you can absorb if rates rise by another 25 or 50 basis points. If that increase would strain your budget, consider fixing a portion of your loan or building a larger offset balance.

Use your offset. Every dollar in a 100% offset account reduces the interest you pay. In a rising rate environment, a well-funded offset is your best defence against increasing costs.

Consider fixing a portion. If you want certainty on some of your repayments while retaining variable flexibility, a split loan can achieve both.

If You Are on a Fixed Rate About to Expire

Act before the revert. Do not wait until your fixed rate expires and you land on the lender's standard variable rate. Start the refinance or renegotiation process at least two to three months before the fixed period ends.

Compare the full market. Your existing lender's retention offer is rarely the best deal available. A broker who compares 35+ lenders can show you what the market is actually offering.

If You Are About to Buy

Get pre-approved at current rates. Pre-approval locks in your borrowing capacity based on today's rates and gives you a clear purchasing budget.

Factor in future rate increases. If the RBA raises rates by another 50 basis points, what does that do to your monthly repayment? Can you still comfortably afford the property? Building a buffer into your purchasing decision protects you from rate surprises after settlement.

Use the right calculator. Our repayment calculator lets you model repayments at different rates, so you can see the impact of potential increases before you commit. The repayment frequency calculator shows how fortnightly payments can offset the impact of rate rises.

If You Have Not Reviewed Your Loan Recently

A rate environment where the RBA is actively changing the cash rate is exactly the time to check whether your current loan is still competitive. Banks do not automatically pass on rate movements equally to all customers. New customer rates and existing customer rates can diverge significantly.

If your last loan review was more than 12 months ago, there is a good chance you are paying more than you need to. A free rate review takes 15 minutes and can identify whether switching lenders would save you money.

How the RBA Calendar Works

The RBA's Monetary Policy Board meets eight times per year. The remaining meetings for 2026 are:

  • 5 May

  • 24 June

  • 2 September

  • 4 November

  • 8 December

Each meeting is followed by a media release at 2:30 pm AEST announcing the decision, and a media conference at 3:30 pm. Any rate change takes effect the following business day.

Lenders typically announce their response (whether they will pass on the change in full, in part, or not at all) within one to seven days of the RBA decision.

What to Do Next

Lender Edge compares 35+ lenders with $0 broker fees. MFAA full member. Based on the Fleurieu Peninsula, servicing the Fleurieu, Adelaide Hills and Greater Adelaide.

This article is general information only and does not constitute financial advice. RBA cash rate decisions and lender pricing are subject to change. Your personal circumstances may differ. Lender Edge, Credit Representative Number 574076, is an Authorised Credit Representative of Astute Financial Management Pty Ltd, Australian Credit Licence 364253.