What the RBA Decided in 2026
The Reserve Bank of Australia’s latest rate decision set the cash rate target at 3.60% per annum, effective from February 2026. This decision marked a reduction of 25 basis points from the previous rate of 3.85%.
How the Cash Rate Flows Through to Your Mortgage
Lenders typically adjust their variable mortgage rates in response to changes in the cash rate. While the full pass-through is not guaranteed, a rate cut generally means lower interest costs on variable-rate loans. Fixed-rate loans are not directly affected during the fixed period.
Calculating the Effect on Your Monthly Repayment
The change in cash rate can be translated into a change in monthly repayments for variable-rate loans. For a loan with a remaining term of 25 years and an interest rate that moves in line with the cash rate decline, the estimated change in monthly repayment for different loan amounts is as follows:
| Loan Amount | Estimated Change in Monthly Repayment |
|---|---|
| $400,000 | Approximately $60 lower |
| $600,000 | Approximately $90 lower |
| $800,000 | Approximately $120 lower |
| $1,000,000 | Approximately $150 lower |
These calculations assume a standard variable rate mortgage and illustrate the potential direct effect of a 25 basis point rate reduction. Actual changes depend on your lender’s specific rate adjustments and loan terms.
What Homeowners Should Consider Next
With the cash rate change, homeowners may want to review their current mortgage terms and compare variable rates. If you are considering refinancing, the lower rate environment could improve the cost effectiveness of a new loan. Additionally, the rate decision might influence property market activity, so staying informed about financing options can help you make a timely decision.