The RBA Has Raised Interest Rates — How Will It Impact My Mortgage?

What a cash rate rise means for your repayments, your loan balance, and what you can do about it.

When the Reserve Bank of Australia (RBA) raises the cash rate, most lenders pass that increase on to variable rate home loan customers within days. If you are on a variable rate mortgage, your minimum monthly repayment goes up — sometimes significantly. This guide explains exactly how to calculate the impact and how to use the Mortgage Paydown Calculator to model it for your own loan.

How the Cash Rate Connects to Your Mortgage Rate

The RBA cash rate is the interest rate at which banks borrow money overnight. When it rises, the cost of funds for lenders increases — and they typically pass that cost on to borrowers by raising variable home loan rates by a similar amount.

A 0.25% (25 basis point) cash rate increase usually results in a 0.25% rise in your variable mortgage rate. Some lenders may pass on slightly more or less, but in practice the change is almost always in line with the RBA move.

How Much Will My Repayment Go Up?

The increase depends on your remaining loan balance and remaining term — not your original loan amount. A rough rule of thumb: each 0.25% rate rise adds approximately $65–$70 per month for every $400,000 of remaining balance, assuming around 25 years left on the loan.

Here are some indicative monthly repayment increases for a 0.25% rate rise with 25 years remaining:

Figures are approximate. Use the calculator below for your exact numbers.

Why the Long-Term Cost Is Bigger Than the Monthly Rise Suggests

A higher rate does not just increase your monthly repayment — it changes how every future repayment is split between interest and principal. At a higher rate, a larger share of each repayment goes to interest and a smaller share reduces your balance.

This means the total interest you pay over the life of the loan increases by far more than the simple monthly difference multiplied by the months remaining. On a $600,000 loan with 25 years left, a 1% rate rise adds roughly $100,000–$120,000 in total interest — not just the monthly difference summed up.

What You Can Do to Reduce the Impact

1. Increase Your Repayment to Match the Higher Rate

Your lender will raise your minimum repayment to account for the new rate. But if you can afford to pay a little more on top of the new minimum, you can offset some of the extra interest and keep your loan on a similar paydown trajectory to before the rate rise.

Even an extra $100–$200 per month above the new minimum repayment can meaningfully reduce the long-term impact of a rate rise.

2. Make a Lump Sum Payment If You Have Savings

Reducing your principal now directly reduces the balance that the higher rate is applied to. A $10,000 lump sum today saves you interest on that $10,000 at the new (higher) rate for every remaining month of the loan.

If you have savings sitting in a transaction or savings account earning less than your mortgage rate, it may be worth putting some of it onto your loan — or into an offset account if you have one.

3. Consider Refinancing

If your current lender's variable rate is above the market, refinancing to a lower-rate product could save thousands — even after accounting for any switching costs or discharge fees. Compare rates carefully and factor in the time and cost of refinancing against your expected savings.

4. Review Your Offset Account Strategy

If you have an offset account, maximising the balance in it reduces the interest-bearing portion of your loan — providing a similar benefit to paying down the principal, but keeping your money accessible. At a higher rate, every extra dollar in your offset account saves more interest than it did before.

How to Model a Rate Rise in the Calculator

To see the exact impact of a rate rise on your loan, use the Ad-Hoc Rate Changes section of the calculator:

1. Enter your current loan details in Section 1 — use your current rate (before the rise) as the initial rate.
2. Scroll to Section 4 — Ad-Hoc Rate Changes and add a row.
3. Set the date to when the new rate takes effect (your lender will notify you).
4. Enter the new rate — your current rate plus the RBA increase (e.g., if your rate was 6.24% and the RBA raised by 0.25%, enter 6.49%).
5. Click Calculate My Paydown Plan.

The results will show you your new baseline — total interest under the higher rate, new end date, and the updated balance chart. You can then add extra repayments in Section 2 to see how much of the damage you can undo.