Rate rises are usually discussed as a cost for borrowers, but the RBA's own officials stress that higher rates flow through to deposits as well, and for many households the two sides sit side by side.

Every time the cash rate moves, the conversation tends to focus on mortgages. That is understandable: repayments are a large and visible cost for millions of households. But the cash rate is the anchor for a much wider set of interest rates, including those paid on savings.

Assistant Governor (Financial Markets) Christopher Kent summed it up in a single sentence in his remarks in Sydney on 13 August: "Lending and deposit rates have increased in line with the cash rate."

That observation came after three quarter-point increases earlier in the year. A fourth followed on 29 September, when the Monetary Policy Board lifted the cash rate target to 4.60 per cent. In total, the cash rate has risen by 1 percentage point in 2026, from 3.60 per cent.

Why both sides move

The cash rate influences what lenders pay for funding and what they charge for credit. When it rises, the effect tends to show up on both the asset and liability sides of a bank's balance sheet: loans become more expensive, and deposits generally earn more.

Kent's remark confirmed that this pass-through has been happening. It is also central to how monetary policy works. Higher borrowing costs discourage spending financed by debt, while higher returns on deposits make saving relatively more attractive. Both effects lean against demand, which is the point when inflation is too high.

The Board's 29 September statement said inflation remains elevated and judged that "a further tightening of financial conditions" was warranted to return inflation to target within a reasonable period. Headline inflation was 4.0 per cent over the year to August on the monthly CPI indicator, while underlying inflation, measured by the trimmed mean, was 3.6 per cent over the year to the June quarter. The target is 2–3 per cent.

The borrower's side

For mortgage holders, the effect has been clear. Kent said in August: "Scheduled mortgage payments have risen and are now close to their 2024 peak as a share of household disposable income." He also noted that "housing credit growth, which moves closely with housing prices, has started to slow" and that "Growth of new housing loans has fallen significantly."

Governor Michele Bullock, speaking at her 29 September media conference, put mortgage payments "back up sort of around 10 per cent of" disposable income, an approximation, compared with "when we had interest rates at 4.35 per cent, so they'll go up a bit further."

The RBA's October 2026 Financial Stability Review observed that "Scheduled mortgage payments have been the largest claim on household income". It found the share of variable-rate owner-occupier borrowers with a cash-flow shortfall "remains relatively low at around 2 per cent".

The saver's side, and the offset in between

On the other side of the ledger, households with deposits have seen the rates on those balances rise as well, according to Kent's account. How much any individual saver benefits depends on the product and institution, and the RBA's comments do not speak to specific accounts.

For many borrowers, the two sides are linked through offset accounts. Bullock described the arrangement at her 29 September media conference: "a lot of people have a mortgage, and then they have an offset account, which sits in the background."

She pointed to the scale of these balances: "the amount of money in those offset accounts has actually grown quite a lot over the last decade or so." And she noted how including them alters the picture she was describing: "if you put offset accounts in there, actually, it's declined a bit."

The Financial Stability Review made a related point about buffers, finding that "the median borrower [is] able to cover over a year of scheduled mortgage payments" from offset and redraw balances. That cushion helps explain why arrears on loans 90 or more days past due have risen only slightly and remain "around pre-pandemic levels", according to the review.

The picture is not uniform. The review's media release noted some pockets of stress, and households without significant savings feel higher rates very differently from those with large buffers. Averages and medians can mask considerable variation.

Beyond the bank account

Interest rates on loans and deposits are not the only channel. Bullock said on 29 September that "the most important channel is the exchange rate channel," adding: "The exchange rate channel takes a while to feed through."

Kent explained the mechanism in August: "A higher exchange rate helps moderate inflation by lowering the domestic price of imports." He noted the Australian dollar had been "appreciating by around 5 per cent on a trade-weighted basis since the start of the year." As at 4.00 pm on 9 October, the Australian dollar was worth 69.79 US cents, and the trade-weighted index stood at 64.8.

Timing matters across all channels. Bullock said rate changes "can take 12, perhaps even 18 months" to work through fully, and of the earlier rises this year: "A lot of that effect is still to flow through."

The Board, meanwhile, has not committed to a path. Its statement said it will increase the cash rate further if needed and remain attentive to the data, and Bullock said: "I'm not going to give you forward guidance." The minutes of the September meeting are due on 13 October, the next CPI release on 28 October and the next decision at 2.30 pm on 3 November.

The bottom line

A higher cash rate cuts both ways. As Kent put it, "Lending and deposit rates have increased in line with the cash rate." Borrowers face larger repayments, now close to their 2024 peak as a share of income, while deposit rates have also risen. For households with offset accounts, those two sides of the ledger sit together, and the RBA's own data suggest the typical borrower holds a substantial buffer.

The balance between those effects varies widely from one household to the next. For the RBA, both sides serve the same purpose: cooling demand so inflation returns to its 2–3 per cent target, with the full effect of 2026's rises still working its way through.