Key Highlights

  • On the stated assumptions, a 30-year, $1 million principal-and-interest loan moving from 5.60% to 6.60% sees repayments rise from about $5,741 to about $6,387 a month.
  • In this illustrative example, that is roughly $646 more a month, with the latest 25 basis point step adding about $164.
  • The figures are illustrations rather than RBA estimates, and real outcomes depend on each loan’s balance, term, rate and lender.

Using a set of clearly stated hypothetical assumptions, this walk-through shows how four 25 basis point increases could add roughly $646 a month to the repayments on a $1 million home loan, with the latest rise alone accounting for about $164.

For anyone carrying a large home loan, each move in the cash rate is felt in dollars rather than basis points. The Reserve Bank of Australia (RBA) lifted the cash rate target by 25 basis points to 4.60% on 29 September 2026, effective 30 September. It was the fourth increase of 2026.

What follows is a hypothetical illustration, not an RBA figure and not a description of any actual loan. It is intended to show the mechanics of how repayments respond as rates rise, using fixed assumptions so the numbers are easy to follow.

The assumptions behind the numbers

The illustration rests on the following assumptions:

  • Loan size: $1,000,000.
  • Loan type: a 30-year principal-and-interest loan, with repayments calculated over the full term.
  • Starting rate: a hypothetical variable rate of 5.60% before 2026's rate rises.
  • Pass-through: each of four 25 basis point increases is passed on in full, taking the hypothetical rate to 6.60%, a total rise of 100 basis points.

Actual lender rates vary, and lenders do not always pass on changes in full or at the same time. The starting rate here is a round assumption for illustration only. All repayment figures below are approximate and rounded to the nearest dollar, and they exclude fees, insurance and any other costs associated with a loan.

Step by step through four rises

Under those assumptions, the monthly repayment at the starting rate of 5.60% is about $5,741.

Walking through each 25 basis point step, the hypothetical repayments are:

  • At 5.85%: about $5,899 a month, an increase of about $159.
  • At 6.10%: about $6,060 a month, a further increase of about $161.
  • At 6.35%: about $6,222 a month, a further increase of about $162.
  • At 6.60%: about $6,387 a month, a further increase of about $164.

Across all four steps, the monthly repayment in this illustration rises from about $5,741 to about $6,387, an increase of about $646 a month. Over a full year, that is roughly $7,750 in additional repayments. The final 25 basis point step, corresponding to the size of the September move, adds about $164 a month on its own.

One detail stands out in the walk-through: each successive 25 basis point step adds slightly more to the monthly repayment than the one before, rising from about $159 to about $164.

That is a feature of how principal-and-interest repayments are calculated. Each increase is applied on top of a higher starting rate, and on a loan of this size and term, the arithmetic produces a slightly larger dollar increase each time. The effect is modest in this example, but it means the cumulative impact of several rises is a little larger than simply multiplying the first increase by four.

What the illustration leaves out

A simplified example cannot capture the circumstances of every borrower. Several factors could make a real household's experience quite different:

  • Remaining balance and term: a borrower several years into a loan will usually owe less than the original amount and have fewer years left, which changes the repayment calculation.
  • Lender pricing: rates differ between lenders and products, and the timing and size of pass-through can vary.
  • Fixed-rate periods: borrowers on fixed rates would not see changes until their fixed term ends.
  • Offset and redraw balances: Governor Michele Bullock noted that "a lot of people have a mortgage, and then they have an offset account, which sits in the background."

Borrowers may wish to check their loan terms with their lender to understand how changes in the cash rate apply to their own situation.

Setting the example against the RBA's data

The RBA's own figures provide a system-wide view of how households are coping. The minutes of the 28–29 September Monetary Policy Board meeting, published on 13 October, record that scheduled mortgage payments were about 10% of household disposable income, near their 2024 peak. Bullock said this share was similar to when the cash rate was 4.35%.

The minutes also show that arrears were low, loan impairments were around historical lows, and fewer than 2% of owner-occupier borrowers had a cash flow shortfall, well below the 2023–24 peak. Median savings buffers were just under one year of repayments for borrowers in the lowest income quintile and almost two years for those in the highest.

The Governor acknowledged the strain directly: "Those who have mortgages, yes, this clearly impacts them and it hurts them."

She also explained why the Board judged the rise necessary: "Today's increase in interest rates is needed to slow the economy and return inflation to target." Headline CPI was 4.0% over the year to August 2026 on the monthly measure, while underlying inflation, measured by the trimmed mean, was 3.6% over the year to the June quarter of 2026. Both sit above the RBA's 2–3% target range.

The illustration stops at four rises, matching the number of cash rate increases so far in 2026. Bullock declined to indicate what comes next: "I'm not going to give you forward guidance." She added that "The Board will increase interest rates again if that's what's needed to get inflation down."

The minutes say the Board will consider "increasing the cash rate target further if required." Bullock said the full effect of interest rate changes takes 12 to 18 months, meaning the impact of this year's rises on household budgets and the wider economy is still unfolding.

The bottom line

On the stated hypothetical assumptions, a 30-year, $1 million principal-and-interest loan moving from 5.60% to 6.60% would see monthly repayments rise from about $5,741 to about $6,387, or roughly $646 a month, with the final 25 basis point step adding about $164. These figures are illustrations rather than RBA estimates, and real outcomes depend on each loan's balance, term, rate and lender. The next cash rate decision is scheduled for 2.30 pm on 3 November 2026.

These are illustrative amortisation calculations using an unchanged loan principal and a new 30-year repayment schedule at each interest rate. Actual repayments depend on the outstanding balance, remaining term, lender pricing and timing of repricing.