Interest Rates
The Reserve Bank of Australia lifted the cash rate target by 25 basis points to 4.85 per cent on Melbourne Cup Day, the fifth increase of 2026 and the highest cash rate since late 2008. The decision was far from unanimous. According to the RBA's Monetary Policy Board statement, six members voted to raise rates and three voted to hold at 4.60 per cent.
Coverage from ABC News, SBS and FXStreet points to the same drivers: inflation that has proved stickier than forecast, with faster price growth in technology-related goods linked to AI investment, alongside higher fuel and commodity costs. Our earlier article on the 4.3 per cent September quarter inflation result covered the data that set up this decision, and the major banks had largely called a November rise on the back of it.
Two details matter for borrowers. First, the three dissenting votes show the board is no longer of one mind on how much tightening is needed. Second, ABC reporting indicates the statement dropped its explicit reference to raising the cash rate further if needed, which some commentators read as opening the door to a pause at the 8 December meeting. Other coverage says inflation is expected to stay elevated through much of 2027, so a pause should not be treated as a pivot.
The cash rate is a wholesale benchmark. Your lender sets your actual rate, and most are expected to pass the full 0.25 percentage points on to variable borrowers. Macquarie has already announced a 25 basis point rise effective 19 November. The table below shows the approximate monthly impact on principal and interest loans over 30 years, using an illustrative variable rate of 6.34 per cent moving to 6.59 per cent. These are assumptions for illustration, not current quotes.
| Loan amount | Repayment at 6.34% | Repayment at 6.59% | Monthly increase |
|---|---|---|---|
| $500,000 | $3,108 | $3,190 | $82 |
| $600,000 | $3,729 | $3,828 | $98 |
| $800,000 | $4,973 | $5,104 | $131 |
| $1,000,000 | $6,216 | $6,380 | $164 |
Because the rise is the fifth this year, the cumulative effect is what borrowers feel. A borrower who held a $600,000 loan at the start of 2026 has seen their repayment climb by several hundred dollars a month, a squeeze that falls hardest on recent buyers in Sydney, Melbourne, Brisbane and Perth who borrowed at the top of their capacity.
Higher rates are landing in a softer property market. Cotality's October Home Value Index showed national values down 1.2 per cent for the month, the seventh consecutive fall, leaving the index 6.7 per cent below its March peak, roughly $63,400 on the median Australian dwelling. Brisbane (down 2.0 per cent) and Perth (down 1.7 per cent) led October's declines, followed by Sydney (down 1.6 per cent). Cotality expects conditions to stay subdued through the rest of 2026 and into 2027.
Why this matters: Falling values reduce your equity just as repayments rise. Borrowers with a loan to value ratio above 80 per cent may find refinancing harder, because a lower valuation can push them back into LMI territory. Our piece on the equity buffer at 4.60 per cent explains how to check where you stand.
Check your lender's new rate when it is announced and compare it to the market. Lenders price new customers more sharply than existing ones, so a loyalty gap is common. Read our guide on the cost of refinancing before deciding whether a switch is worthwhile.
Borrowing power shrinks as rates rise, because lenders assess you at a buffer above the actual rate. Get a fresh assessment before you bid, and see our explainer on the serviceability buffer. Falling values do give buyers more stock and more negotiating room, as Cotality's Tim Lawless has noted.
Higher interest costs squeeze cash flow, although rents have been rising. Our article on rents and yields at a six-year high shows where income is offsetting part of the cost. Review your offset balances and loan structure before the next meeting on 8 December.
If you are struggling: Contact your lender early and ask about hardship options before you miss a repayment. A broker can also review whether restructuring or refinancing could ease the pressure.
Run a quick rate check, or tell us your balance and lender and we will show you what the rise costs and whether a better rate is available.
Most lenders are expected to pass the full 25 basis points on to variable rate borrowers, with effective dates typically falling within one to three weeks of the announcement. Macquarie has already announced a rise of 0.25 percentage points effective 19 November. Lenders set their own rates, so the timing and size can differ, and your lender must give you notice before the change applies. A broker can compare what each lender is charging now.
It depends on your circumstances. Three of nine board members preferred to hold, and the RBA removed its explicit tightening bias, so some economists see a December pause as possible. Fixing gives certainty but can lock you out of extra repayments and an offset account on some products, and fixed rates already price in expected further rises. A split between fixed and variable is a common middle path, and your broker can model the options against your budget.
Often yes. Lenders compete hardest for new customers, so borrowers who have sat on a standard variable rate for several years can frequently find a lower rate elsewhere. The saving has to outweigh discharge fees, application costs and any LMI if your equity has fallen, which matters now that Cotality shows national values 6.7 per cent below the March peak. A broker can check your current loan to value ratio and run the numbers before you commit.
For more answers on loans, fees and the application process, see our frequently asked questions. Mankin Finance holds 130+ five-star Google reviews from clients across Australia.
Disclaimer: This article is general information only and does not constitute financial, mortgage, tax or credit advice. It does not take into account your objectives, financial situation or needs. Repayment figures are illustrative and rates, lender policies and market data change, so confirm current details with your lender or a qualified adviser before acting. Mankin Finance Pty Ltd, Australian Credit Licence 389087.
Book a call on +61 420 699 983 and we will review your rate, your equity and your options. Prefer to start online? You can apply in a few minutes.
Book a free strategy call