- The cash rate target increased by 0.25 percentage points
- The new cash rate target is 4.60%
- The RBA said inflation remains elevated and some upside risks have materialised.
- The Board said it remains prepared to increase the cash rate further if needed.
- The decision was unanimous.
On 29 September 2026, the Reserve Bank of Australia increased the cash rate target by 25 basis points to 4.60% The RBA said inflation remains elevated and pointed to higher global energy prices, stronger-than-expected recent inflation outcomes, domestic capacity pressures and rising business costs.
The RBA also noted that economic growth has slowed, consumer spending is easing and housing prices have fallen in most capital cities, while new housing lending has declined. Even so, the Board judged that another tightening in financial conditions was warranted to help return inflation to target.
How much could a 0.25% mortgage rate increase add to repayments?
If a lender passes on the full 25 basis-point increase to a variable home loan, the repayment impact depends on your balance, remaining term and existing rate.
The examples below assume a 30-year principal-and-interest loan where the home loan rate moves from 6.00% to 6.25%
| Loan balance | At 6.00% | At 6.25% | Approx. increase |
|---|---|---|---|
| $400,000 | $2,398 | $2,463 | +$65/month |
| $500,000 | $2,998 | $3,079 | +$81/month |
| $700,000 | $4,197 | $4,310 | +$113/month |
| $1,000,000 | $5,996 | $6,157 | +$162/month |
Illustrative calculations only. Actual lender repayments can differ because of remaining term, fees, repayment frequency, offset balances and lender calculation methods.
Why did the RBA raise rates again?
The RBA said several inflation risks identified earlier in the year are now materialising. It pointed to higher global energy prices following broader conflict in the Middle East, strong global demand for technology-related goods linked to AI investment, domestic capacity pressures and Australian inflation outcomes that were stronger than expected.
The Board also said firms are reporting cost pressures and are either raising prices or considering doing so, while short-term inflation expectations remain elevated.
What should variable-rate borrowers do now?
Do not assume your rate moves exactly with the cash rate. Check your lender's announcement and effective date.
Use your current balance and remaining term rather than the original amount borrowed.
Your lender may have different pricing available, particularly if your mortgage has not been reviewed recently.
Include discharge fees, setup costs, annual fees and the effect of changing the loan term.
What does this mean for first home buyers?
Higher rates can reduce borrowing capacity because lenders assess whether repayments remain affordable under their serviceability rules. A borrowing estimate completed several months ago may therefore no longer reflect current lending conditions.
Before making an offer, first home buyers should reassess borrowing power, deposit strategy and repayment buffers. A larger deposit may reduce the loan and repayments, but buyers should also consider keeping a reasonable cash buffer for settlement and unexpected costs.
What about borrowers on a fixed rate?
An existing fixed rate generally remains unchanged during the agreed fixed period. The bigger question is what rate applies when that period expires.
Borrowers approaching fixed-rate expiry can compare the lender's revert rate with other options before the fixed term ends. Refinancing during a fixed period can involve break costs, so those costs need to be included.
Could refinancing make sense?
Possibly, but refinancing should be based on the whole loan rather than the headline rate alone. Compare your outstanding balance, current and proposed rates, remaining term, fees, switching costs and features such as offset or redraw.
Extending a loan back to a new 30-year term can reduce the monthly repayment while potentially increasing lifetime interest. For a cleaner comparison, start with the same remaining term.
LoanFi's take: review the loan, not just the headline
A rate rise is a sensible trigger to review your mortgage, but it is not a reason to make a rushed decision.
The practical question is whether your current loan remains competitive for your circumstances. Check the rate you are actually paying, your remaining term, fees and loan features, and compare the cost of switching.
For borrowers with meaningful cash savings, an offset account can become more valuable as mortgage rates rise because money held in a 100% offset can reduce the balance on which interest is calculated.
What could happen next?
The RBA has not committed to a predetermined path. It said it will continue to respond to the data and remains prepared to increase the cash rate further if needed to return inflation sustainably to target.
Borrowers should therefore be cautious about budgeting around assumptions of imminent rate cuts. Testing repayments at a higher rate can provide a more resilient household budget.
Frequently asked questions
What is the RBA cash rate now?
Following the 29 September 2026 decision, the cash rate target is 4.60%, up from 4.35%.
Will every bank increase home loan rates by 0.25%?
No. Each lender makes its own pricing decision and the effective date can vary.
Does this affect fixed home loans immediately?
Generally, an existing fixed rate remains fixed for its agreed period. The rate available after expiry may be different.
Should I refinance immediately?
Not necessarily. Compare the expected saving with switching costs, fees, features and the remaining term first.
Concerned about what 4.60% means for your mortgage?
LoanFi can review your current home loan, repayment structure and refinance options and help you understand whether a different lending structure may suit your goals.
Book a LoanFi mortgage review