How do RBA decisions flow through to repayments and prices?

How do RBA decisions flow through to mortgage repayments, buyers and property prices?

The Reserve Bank sets the cash rate. Lenders then decide when and how much of each change to pass on to home loan rates, and that changes repayments, how much buyers can borrow, and in time what they can pay for a home. The effect is uneven: it depends on whether you hold a variable loan, how stretched you are, and how much housing supply is available where you want to buy.

How does a cash rate change reach my variable repayments?

Variable rates follow the cash rate, but lenders choose the timing. Some move within hours, others wait. In our coverage of a lender that repriced the same day, the full 25 basis point rise was passed on, and deposit rates lifted by the same amount. Thin margins leave little room to absorb a rise.

As of September 2026, our fixed rate repricing explainer reported that a $600,000 loan costs $364 more a month once four 2026 rises flow through. If your lender has not yet repriced, assume the full rise is still coming.

Why do fixed rates move before the RBA does?

Fixed rates are priced off wholesale funding costs, including swap rates, which reflect where markets expect the cash rate to go over the fixed term. That makes a fixed rate a forecast as much as a reaction. When lenders lift fixed rates straight after a decision, they are telling you they expect funding to stay expensive.

The trade-off is certainty against flexibility. Fixing pays for protection against further rises, but if rates peak you may lock in a rate that looks high in hindsight. A split loan, fixing the part you cannot afford to see rise, is a legitimate middle path. Check break costs and whether extra repayments are allowed before you commit.

How do rate rises change how much I can borrow?

Banks do not lend up to what you can pay today. They test your loan at a buffer above the actual rate, so each rise cuts your maximum loan even if your income has not changed. As we explained in our piece on the affordability paradox, borrowing capacity can shrink faster than prices fall, so a cheaper property can still be harder to buy.

This is why pre-approvals go stale. Before relying on one, ask your lender or broker to reassess it at the current rate and buffer, and keep a margin for another rise.

Do higher rates always push property prices down?

Not evenly, and not at the same speed. Price outcomes depend on who is buying, how close they are to their borrowing limit, and how much new supply can respond. Our post-Budget market analysis explains why one national change can sink some cities while others turn. Markets with a high investor share, stretched price-to-income ratios and more room to build feel pressure first.

Where little is being built, sellers can wait and prices stop falling. Where stock is plentiful, weak demand shows up straight in prices. Clearance rates and discounting are the early signals to watch.

What do rate rises do to new housing supply?

Higher rates can reduce supply, which then supports rents and prices. Developers carry finance costs through the build, so apartments, with long timelines, are hit hardest. Our housing approvals coverage explains that an approval is permission to build, not a commitment. If costs exceed expected sale prices, the approval sits unused.

This is the policy trade-off: tighter money fights inflation but can slow the building that eases the shortage. Our look at project viability shows why apartment projects are the first to stall.

What happens if inflation stays high and the RBA keeps tightening?

The RBA watches inflation, wages and the labour market together. Services inflation, rents and wage growth respond slowly to the cash rate, so rises can be followed by more rises. As our coverage of how rate hikes land unevenly explains, the squeeze falls mostly on recent, highly leveraged borrowers, while outright owners and renters feel no repayment change.

That is why a decision can feel slow to work. Plan around the range of outcomes, not a single forecast: test your budget against a further rise, and keep a buffer for repayments.

Key terms

  • Cash rate: the RBA’s target for overnight lending between banks, the anchor for most other rates.
  • Variable rate: a loan rate your lender can change, usually after a cash rate move.
  • Fixed rate: a rate locked for a set term, priced off expected funding costs.
  • Serviceability buffer: the extra margin banks add to the loan rate when testing whether you can repay.
  • Basis point: one hundredth of a percentage point, so 25 basis points is 0.25%.
  • Trimmed mean inflation: the RBA’s preferred inflation gauge, which removes the most extreme price moves.

Latest coverage on this topic

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General info, not financial advice.