Banks Pass On the Full RBA Hike: Why the Gap Between Lenders Matters Now

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Within a day of the Reserve Bank lifting the cash rate to 4.85 per cent on 3 November, the major lenders have confirmed what most borrowers expected. Commonwealth Bank, Westpac, NAB and ANZ, along with ING, will pass the full 0.25 percentage point increase on to variable home loans from 13 November, according to coverage by Savings.com.au and ABC News. Macquarie moved first, with its increase applying from 19 November.

It is the fifth cash rate rise this year, and the full pass-through is no surprise. The more useful story for borrowers anywhere in Australia is what happens next: the lenders are not all starting from the same place, and that spread is now worth real money.

What the lenders have announced

Every major lender has chosen to pass on the increase in full rather than absorb part of it. Macquarie also lifted savings rates by the same amount, and Westpac has said it will adjust rates on selected savings products from 13 November. All four majors encouraged customers who expect to struggle with repayments to contact them early.

Canstar data reported in the coverage shows where advertised variable rates sit after the rises. Westpac holds the lowest of the majors at 6.49 per cent, followed by NAB from 6.54 per cent, CBA at 6.59 per cent and ANZ at 6.75 per cent. These are headline advertised rates, and the rate an individual borrower actually pays depends on loan size, loan to value ratio, owner-occupier or investor status and any discount negotiated.

What the rise costs on common loan sizes

The table below shows the effect of a 0.25 per cent increase on a 30-year principal and interest loan, using the lowest big four advertised rate of 6.49 per cent as the starting point. It is illustrative only, and your own rate and balance will differ.

Loan balance	Monthly at 6.49%	Monthly at 6.74%	Monthly increase	Annual increase
$500,000	$3,157	$3,240	+$83	+$996
$650,000	$4,104	$4,212	+$107	+$1,284
$800,000	$5,051	$5,183	+$132	+$1,584
$1,000,000	$6,314	$6,479	+$165	+$1,980

Borrowers on higher rates feel a slightly larger dollar effect, because the same 0.25 per cent applies to a more expensive repayment base. More importantly, a borrower sitting on a rate well above the cheapest options is paying that premium every month on top of the rise.

Why the spread between lenders now matters

When rates were falling or flat, many borrowers stayed put because the gap between lenders was modest and switching felt like effort for little reward. Five rises in a year change that arithmetic. Each increase is passed on in full by most lenders, so the gap between a competitive rate and an uncompetitive one does not close. It simply sits at a higher level.

Broker industry reporting this week has described the refinancing gap widening as lenders pass on the full increase, which fits what we see in practice. Lenders often price new customers more sharply than existing ones, so a loan written two or three years ago can carry a rate noticeably above what the same lender offers a new borrower today. That is true in Sydney and Melbourne, and equally in Brisbane, Perth, Adelaide, Hobart, Canberra, Darwin and regional markets.

Who is best placed to refinance

• Borrowers under 80 per cent loan to value ratio: No lenders mortgage insurance applies, and the widest range of lenders is available.
• Borrowers who have not reviewed their rate in two or more years: The longer the loan has sat, the more likely it is that pricing has drifted from the market.
• Investors: Investor rates often carry a higher premium, so a rate difference is amplified across the portfolio, and interest is generally tax deductible, which a broker and accountant can model together.
• Borrowers with a larger balance: A 0.20 to 0.30 per cent saving scales with the loan, so the benefit is greatest on $700,000 and above.

Practical steps before 13 November

Lenders must give borrowers notice before a rate change takes effect, so you have time to act. Start by checking the rate you are actually paying against what is currently advertised. Then ask whether your lender will reprice your existing loan, since a phone call occasionally recovers part of the gap. If it does not, a refinance is the stronger lever.

It is also a sound moment to look at structure. Splitting a loan into fixed and variable portions can limit exposure to further increases, and keeping an offset account funded reduces the interest charged without locking money away. Our split calculator lets you compare these options side by side.

What comes next

The RBA has made clear that inflation remains the priority, and the market will now turn to the next inflation print for hints on direction. Whether or not further rises arrive, the lesson of the past year is that a loan left on autopilot gets more expensive relative to the market with every move. The ABS September quarter lending indicators are due on 11 November, which will show how owner-occupiers and investors have been responding.