Latest decision · 29 September 2026

The RBA lifted the cash rate to 4.60%

The Reserve Bank raised the cash rate by 0.25% on 29 September. It was the fourth rise of 2026, taking the total increase for the year to 0.75%.

The reasoning was inflation. Energy prices have climbed on the back of the conflict in the Middle East, and that has fed through into the price of other goods and services. The Board said it wants to stop high inflation becoming embedded, which is central bank language for wanting to slow spending down.

If you are on a variable rate, your lender will almost certainly pass this on, usually within a week or two and usually in full. The flip side, if you have money in the bank, is that savings and term deposit rates tend to rise too.

Why the 3% option matters

When a lender works out what you can borrow, they do not assess you at the rate you are being offered. They add 3% on top and check you could still afford it. That is an APRA requirement, and it applies whichever lender you go to.

So the 3% setting is not a doomsday scenario. It is the number the bank has already decided you should be able to handle. Worth knowing whether you actually could.

Interest only does not soften a rate rise. It sharpens it

Most people assume interest only is the safer place to be when rates are climbing, because the repayment is smaller to start with. In dollar terms it is the opposite. On principal and interest, part of your repayment is principal, and principal does not move when the rate moves, so the rise is spread across the whole remaining term. On interest only there is nothing else in the repayment. The full rise lands on the entire balance, every month.

Here is what that looks like on a $600,000 loan at 5.99% with 30 years remaining.

Figures are extra per month. Roughly a quarter more on interest only, at every step. That matters most for investors and for SMSF loans, where interest only is common.

There is a second thing worth knowing. When an interest only period ends, the loan switches to principal and interest over a shorter remaining term, and that jump is usually far bigger than any rate rise. If yours is due to end in the next year or two, it is worth a conversation before it happens rather than after.

What you can actually do about it

1. Find out what rate you are on

   Most people cannot tell you their rate to the decimal. Look at your last statement or log into your banking app. You cannot tell if you are being looked after until you know the number.

2. Ask your lender to do better

   Existing customers routinely pay more than new ones for the same product. A phone call asking for the new customer rate works more often than people expect. If it does not, that tells you something too.

3. Put your savings in an offset

   Every dollar sitting in an offset account is a dollar you are not paying interest on, and at a higher rate that dollar works harder than it did last month.

4. Think carefully before fixing

   Fixing feels safe when rates are climbing, but banks price fixed rates off where they expect rates to go, not where they are. Fixed loans also usually limit extra repayments and offsets. It can be the right call, it just is not automatically the safe one.

How this is calculated

• Principal and interest repayments are monthly, over the years remaining, and the rise is recalculated over that same remaining term.
• Interest only repayments are the balance multiplied by the rate, divided by twelve, so the years remaining do not affect them.
• The interest only figure assumes the interest only period continues. It does not model the switch to principal and interest at the end of that period.
• Lenders do not all pass on the full rise, and they do not all do it on the same day. Your actual change may differ.
• If you are on a fixed rate, nothing changes until your fixed term ends.