Key Highlights

  • A 25-basis-point rise is an illustration only and not a quote from any lender.
  • The example uses a $500,000 Loan repaid over 30 years.
  • The real impact depends on each lender's rate, loan type and repayment structure.
  • Repayment changes compound over the life of a loan, so the total cost can be significant.

A quarter of a percentage point sounds small. On 3 November 2026, it was the size of the Reserve Bank of Australia's latest move, when the Monetary Policy Board raised the cash rate target from 4.60 per cent to 4.85 per cent, effective 4 November.

But what does 25 basis points look like on an actual mortgage? This explainer works through an illustration using a hypothetical $500,000 loan. It is not an RBA calculation, it does not describe any real loan product, and it is not a forecast of what any borrower will pay.

The illustration below assumes a standard principal-and-interest loan over 30 years, with monthly repayments, and hypothetical interest rates of 6.00 per cent and 6.25 per cent. Those rates were chosen only to show the effect of a 25-basis-point difference. They are not the RBA's cash rate, and they are not a statement about the rates any lender currently charges.

The illustration: $500,000 at two hypothetical rates

On the assumptions above, the monthly repayments work out as follows:

  • At a hypothetical 6.00 per cent: about $2,997.75 a month.
  • At a hypothetical 6.25 per cent: about $3,078.59 a month.
  • Difference: about $80.83 a month.

Over a year, that monthly difference adds up to roughly $970.

If the hypothetical rate stayed at the higher level for the entire 30-year term, and nothing else changed, the extra repayments would total roughly $29,100. In this illustration, total interest over the life of the loan would be about $579,191 at 6.00 per cent and about $608,291 at 6.25 per cent.

That full-term figure needs a strong caveat. Variable rates rarely stay fixed for three decades, borrowers often make extra repayments or refinance, and loan terms change. The 30-year totals are included only to show how a small rate difference compounds over a long horizon, not as a prediction for any household.

Why the real-world effect varies

The cash rate target is the RBA's policy setting. It influences the broader structure of interest rates, but it does not set Mortgage rates directly. Lenders set their own rates and decide for themselves whether, when and by how much to pass on a cash rate change.

Several other factors also shape what any individual borrower experiences:

  • Loan size and remaining term. A smaller balance or shorter remaining term means a smaller dollar change for the same rate move.
  • Loan type. Fixed-rate loans are not affected until the fixed period ends. Interest-only loans have a different repayment structure.
  • Offset and redraw balances. Money held against a loan reduces the interest charged.
  • Lender policies. Each lender's pricing and timing differs.

For these reasons, the $80.83 figure is an illustration of the arithmetic of a quarter-point, not an estimate of what the 3 November decision will cost any particular household.

Why the quarter-point happened

The Board's decision was by majority: six members voted to raise the cash rate target, while three voted to leave it at 4.60 per cent. The statement gives no reasons for the minority view.

The majority's reasoning, as set out in the statement, was that "there is an increasing risk that higher Inflation expectations will become embedded." It said that "a further tightening in financial conditions is warranted to support the return of inflation to target."

The inflation backdrop is important context for why the RBA is willing to accept higher borrowing costs. Headline CPI rose 4.3 per cent over the year to September 2026 on the monthly measure, and 3.9 per cent over the year to the September quarter. Trimmed mean (underlying) inflation rose 1.0 per cent in the September quarter, up from 0.8 per cent in the June quarter, and 3.7 per cent over the year. All of these sit above the RBA's 2–3 per cent target range.

Governor Michele Bullock framed the trade-off in her opening statement to the Senate Economics Legislation Committee on 28 October: "High inflation hurts everyone." She continued: "It means higher grocery costs, higher rent, and higher electricity bills." And: "It makes everyone's pay packets and savings worth less".

the RBA's view is that the costs of higher interest rates for borrowers need to be weighed against the costs that persistent inflation imposes on households more broadly.

The household picture

The RBA's November Statement on Monetary Policy (SMP) indicates that household budgets are already under pressure. Household consumption has been a key drag on growth, and the RBA forecasts consumption growth of 1.4 per cent over the year to December 2026, with the outlook revised lower. Real household Disposable Income growth is forecast by the RBA to slow to 1.0 per cent by December 2026.

The Board's statement observes: "The increases in the cash rate target since the beginning of the year have tightened financial conditions." There have been five 25-basis-point rises in 2026, a total of 125 basis points.

The Financial Stability Review released on 1 October 2026 offered some reassurance at the system level. It found that most borrowers are well placed for softer growth and lower housing prices, with most having positive Equity and large savings buffers. It also cautioned: "the Australian financial system remains resilient, but there's no room for complacency."

As for what comes next, the RBA's forecasts assume a cash rate path based on market pricing as at 28 October 2026, which implied the cash rate rising about 35 basis points by mid-2027 before stabilising at 4.8 per cent in 2028. That is market pricing, not an RBA promise. The Board says it "will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions." The next decision is due on 8 December 2026.

The bottom line

In this hypothetical illustration, a 25-basis-point rise from 6.00 per cent to 6.25 per cent on a $500,000, 30-year principal-and-interest loan adds about $80.83 to the monthly repayment, or roughly $970 a year. Those numbers show the arithmetic of a quarter-point; they are not RBA figures, and they do not describe what any lender charges or what any borrower will pay. Lenders set their own rates, and individual circumstances vary widely. The RBA's reason for the November rise was its concern that inflation, on both headline and underlying measures, remains broadly based and that higher expectations could become embedded.