The Reserve Bank lifted the cash rate by 0.25 percentage points to 4.85 per cent on Tuesday, the highest since December 2008. By Wednesday, four lenders had confirmed they would pass the full increase to variable-rate borrowers from Friday, November 13. Most coverage stops at the repayment arithmetic. The more useful question for borrowers is what happens next to the price gap between lenders.
The repayment bill, in numbers
The extra monthly cost from this latest step is about $77 on a $500,000 loan, $107 on $700,000 and $153 on $1 million. Across the full tightening cycle this year, the cumulative increase sits near $380, $532 and $759 a month respectively.
That is real money, but it is the same arithmetic every lender will apply. It does not tell you who will charge you less.
Full pass-through is the floor, not the ceiling
When the four lenders that moved first all pass on 100 per cent of the rise, they set a visible benchmark. Borrowers on those loans now face a higher headline rate by the same margin.
But a hike is passed through to the existing variable rate. What a lender offers a new customer, or a customer threatening to leave, is a separate decision. That is where competition lives. One large lender had not yet declared its plans at the time of the announcements, which shows the response is not uniform even among the biggest names.
Where smaller lenders have room
Smaller lenders and non-bank lenders do not carry the same cost structure as the majors. Their funding mix, branch networks and capital rules differ, which is why they can sometimes price a new loan lower. The catch is that their funding costs also rise when wholesale rates climb, so the gap is a trade-off rather than a free lunch.
A practical way to think about it:
- Pass-through gives them an opening. If the majors lift rates in full, a challenger that absorbs part of the move can advertise a lower rate without sacrificing much margin.
- Absorption has limits. Funding costs rose too, so any lender undercutting by a wide margin is either accepting thinner profit or taking on a different risk profile.
- Pricing is not the only lever. Cashback offers, fee waivers and faster approvals can matter as much as a few basis points, particularly for brokers placing loans.
We cannot tell from the announcements how many challengers will absorb part of the hike. That will show up in advertised rates over the next few weeks, and it is worth watching rather than assuming.
What this means for refinance leverage
A higher cash rate makes your current lender’s rate a bigger number, which raises the value of shopping around. If a challenger prices a new loan meaningfully below the rate you are about to pay, you hold leverage in two ways: you can move, or you can ask your existing lender to match.
Brokers matter here because they see rates across many lenders at once. A broker can show you whether the gap is narrow or wide on your loan size, which is more useful than a single advertised headline rate.
Before acting, check these:
- Compare rates for your actual loan size and loan-to-value ratio. Advertised rates often apply only to specific tiers.
- Add up switching costs. Discharge fees, application fees and any cashback clawback can eat a small rate saving.
- Ask for a rate review first. Lenders often respond to a credible threat to leave.
Key numbers
- Cash rate: 4.85 per cent, highest since December 2008
- Latest step: +$77 a month on $500,000, +$107 on $700,000, +$153 on $1 million
- Cumulative this year: about $380, $532 and $759 a month
- Pass-through starts Friday, November 13
The savings side is not symmetrical
Borrowers feel the full hike quickly. Savers do not. One major lender is lifting the top rate on two savings accounts to 6.20 and 5.50 per cent, but eligibility conditions apply and base rates stay at 0.10 per cent. Another has announced no savings changes at all.
That asymmetry is the quiet source of bank margin in a rising-rate cycle, and it is another reason competition matters. The lenders most willing to pass benefits through to depositors are often the same ones trying to win new mortgage customers.
Commentary has split along predictable lines
One side of the debate frames the move as a necessary squeeze on inflation, with banks simply passing on a policy decision. The other side focuses on household stress and calls for lenders to be transparent about their plans. Both can be true. The central bank said forecasts do not point to recession, though growth should slow sharply and households will feel worse off.
What the commentary rarely addresses is the competitive question. If households are under pressure, the pricing gap between lenders becomes more valuable, not less.
A practical next step
If you are on a variable rate, find out your exact new repayment from Friday, then compare it with what a challenger or broker can offer for your loan size. A short call now costs nothing, and the leverage is greatest before the rise takes effect.
If you want the weekly signal on rates and credit, subscribe to the Australian Property Review newsletter. For the wider picture on how the cash rate flows through to repayments, see our guide to RBA interest rates and mortgage repayments, and for the investor side of this cycle, see why property investors are exiting and whether it is structural or cyclical.
General info, not financial advice.
