RBA Interest Rate Changes 2026: Impact on Your Mortgage Repayments

14 March 2026|5 min read

How RBA cash rate changes in 2026 affect your mortgage repayments. Includes repayment impact per $100K borrowed, fixed vs variable analysis, and how to stress-test your mortgage.

The current RBA cash rate and how it affects you

As of early 2026, the RBA cash rate sits at 3.85% following a series of adjustments through 2024 and 2025. The cash rate is the interest rate on overnight loans between banks, and it acts as the benchmark that flows through to the interest rates you pay on your mortgage, personal loans, and credit cards, as well as the rates you earn on savings accounts and term deposits. When the RBA raises the cash rate, banks increase their variable mortgage rates, usually by the same amount within days. When the RBA cuts the cash rate, banks lower their rates — though historically they tend to pass on cuts more slowly and sometimes not in full. Since the RBA began raising rates from the record low of 0.10% in May 2022, the average variable mortgage rate has increased from around 2.5% to approximately 6.0% to 6.5%, adding significant pressure to household budgets. A borrower with a $500,000 mortgage saw their monthly repayments increase by approximately $1,200 per month through the rate-rising cycle — a painful adjustment for many families.

How the RBA rate flows through to your mortgage rate

The relationship between the RBA cash rate and your mortgage rate is direct but not one-to-one. Banks fund their home loans through a mix of deposits, wholesale money markets, and securitisation. The cash rate influences the cost of all these funding sources, but other factors also play a role — including global bond markets, deposit competition between banks, and the banks' own profit margin targets. On average, the major banks' standard variable rate sits approximately 2.0% to 2.5% above the cash rate, while discounted rates for new customers sit 1.5% to 2.0% above. This means at a cash rate of 3.85%, you would expect variable rates between 5.35% and 6.35%, depending on your lender, LVR, and negotiating power. When the RBA moves the cash rate, banks typically announce their response within one to two weeks. Variable rate changes usually take effect from the next repayment cycle. If you are on a fixed rate, RBA changes have no immediate impact on your repayments — but they will affect the fixed rates available to you when your fixed term expires. This is why it is crucial to plan ahead for your fixed rate expiry and consider locking in a new rate or switching to variable before the deadline.

Repayment impact per $100,000 borrowed

Understanding how rate changes affect your repayments in dollar terms helps you plan your budget. For every $100,000 borrowed over a 30-year loan term, a 0.25% rate increase adds approximately $15 per month to your repayments. Here is a reference table at common rate levels for a $100,000 loan over 30 years: at 5.00% you pay $537 per month, at 5.50% you pay $568, at 6.00% you pay $600, at 6.50% you pay $632, and at 7.00% you pay $665. To calculate the impact on your actual loan, multiply these figures by your loan balance in hundreds of thousands. For a $600,000 mortgage, a rate increase from 6.00% to 6.25% adds approximately $90 per month ($1,080 per year). Over the full remaining loan term, that 0.25% increase adds roughly $32,400 to your total interest bill. These numbers demonstrate why even small rate movements matter — a 1% increase on a $600,000 loan adds roughly $370 per month or $4,440 per year. Use our Mortgage Calculator to model the exact impact of different rate scenarios on your specific loan balance and remaining term.

Fixed vs variable rates in 2026: which strategy wins?

The fixed vs variable decision in 2026 depends largely on your view of where rates are heading and your appetite for risk. Variable rates in early 2026 sit between 5.5% and 6.5%, while fixed rates for 1 to 3 year terms are ranging from 5.3% to 6.0%. When fixed rates are lower than variable rates (an inverted yield curve), it typically signals that markets expect the RBA to cut rates — meaning fixing could lock you in at a rate that ends up being higher than where variable rates settle. Conversely, if you believe rates will rise further or stay elevated longer than markets expect, fixing provides certainty and budget predictability. A popular middle-ground strategy is splitting your loan — fixing a portion (say 50% to 70%) for rate certainty while keeping the remainder variable to benefit from any rate cuts and to maintain access to offset and redraw facilities, which are not available on most fixed loans. When deciding, consider your personal risk tolerance, how much buffer you have if rates rise, whether you might sell or refinance within the fixed term (triggering break costs), and whether you value certainty of repayments over potential savings.

Stress-testing your mortgage: can you handle higher rates?

Every mortgage holder should stress-test their budget against the possibility of further rate increases, even if cuts are expected. The standard stress test used by lenders adds 3% to the current rate — so if your variable rate is 6.0%, you should confirm you can afford repayments at 9.0%. On a $500,000 loan over 30 years, repayments at 6.0% are $2,998 per month. At 9.0%, they jump to $4,023 — an increase of $1,025 per month. If this number makes you uncomfortable, you need to take action now while conditions are manageable. Options include building a financial buffer of 3 to 6 months of repayments in your offset account, voluntarily increasing your repayments now to the stress-tested level (this builds equity faster and prepares your budget), reviewing discretionary spending using our Budget Planner to find savings, and refinancing to a lower rate or extending your loan term to reduce monthly obligations. If you are already struggling to meet current repayments, contact your lender immediately — all major banks have hardship teams that can arrange temporary reduced repayments, interest-only periods, or loan term extensions. Acting early gives you far more options than waiting until you fall behind.