Key Highlights

  • The RBA raised the cash rate target by 25 basis points to 4.85% in November 2026.
  • The illustration puts the extra cost on a $900,000 Loan at nearly $146 a month.
  • The rates in the example are hypothetical, not quoted lender rates.
  • The RBA's forecasts assume market-implied rates rise further before easing to about 4.8% in 2028.

For larger mortgages, the dollar effect of a quarter-point rise grows in step with the loan, and a hypothetical $900,000 example shows how quickly the figures add up.

Dollar amounts matter more than percentages to most households, and the larger the loan, the more a small percentage change is magnified. That is the core lesson of this illustration, which applies a quarter-point rise in an assumed Interest Rate to a $900,000 mortgage.

The context is the Reserve Bank of Australia's decision on 3 November 2026 to raise the cash rate target by 25 basis points, from 4.60 per cent to 4.85 per cent. The figures below are illustrative. The rates used are hypothetical assumptions, not quoted lender rates, and actual lender pass-through varies.

Working through the numbers

Assume a 30-year principal and interest loan of $900,000. Suppose the interest rate rises, hypothetically, from 6.10 per cent to 6.35 per cent — a 0.25 percentage point increase.

On those assumptions, monthly repayments would move from about $5,454 to about $5,600. That is an increase of about $146 a month, or roughly $1,752 over a year.

Placing the $900,000 example beside smaller loans, using the same hypothetical rates, shows how the effect scales:

  • $350,000: about $2,121 to about $2,178 — about $57 more a month.
  • $550,000: about $3,333 to about $3,422 — about $89 more a month.
  • $900,000: about $5,454 to about $5,600 — about $146 more a month.

In proportional terms, the change is similar across all three, at a little under 3 per cent of the monthly repayment. In dollar terms, it is not. The $900,000 borrower in this illustration pays roughly two and a half times as much extra each month as the $350,000 borrower, simply because the balance is larger.

Why larger balances feel rate changes more

Interest is charged on the outstanding balance, so a given change in the rate produces a bigger dollar change on a bigger loan. That is straightforward arithmetic, but it has practical consequences.

A household with a large loan relative to its income has less room to absorb an extra $146 a month than one with a smaller loan relative to income. A household with a large loan and a large income, on the other hand, may find the change manageable. The illustration says nothing about income, savings or other commitments, all of which shape how a change is actually felt.

It is also worth stressing what the illustration does not capture:

  • Whether a particular lender passes on the full 0.25 percentage points, or when.
  • The borrower's actual interest rate, which may differ from the assumed 6.10 per cent.
  • Loans that are fixed, interest-only, or have a different remaining term.

The RBA's view of household resilience

The RBA's October 2026 Financial Stability Review, published before the November decision, assessed the resilience of borrowers across the system rather than by loan size.

It found that the share of variable-rate owner-occupier borrowers with a cash-flow shortfall "increased a little over the first half of 2026, but remains relatively low at around 2 per cent." It also reported that the median borrower can cover "over a year of scheduled Mortgage payments at current interest rates" from their buffers.

On home values, the Review estimated that "less than 1 per cent of borrowers" are in Negative equity — that is, owing more than their property is worth. That is relevant for larger loans in particular, because the November Statement on Monetary Policy noted that "housing prices have declined by more than expected" and "have declined further from their peak in March".

The Review's summary was that "Most borrowers appear well placed to manage ongoing cost pressures amid declining housing prices." Its broader assessment: "the Australian financial system remains resilient, but there's no room for complacency."

Why the Board accepted the cost

The Monetary Policy Board's decision was split, with six members voting to raise and three to hold. The majority's reasoning centred on inflation. "Inflation is now forecast to remain elevated through much of 2027," the statement said, and "the Board judged that a further tightening in financial conditions is warranted".

The latest Inflation figures, in their different forms, are:

  • Monthly CPI indicator: 4.3 per cent annual headline inflation in the September month.
  • Quarterly headline CPI: 3.9 per cent over the year to the September quarter.
  • Trimmed mean (underlying): 3.7 per cent over the year to the September quarter.

Governor Michele Bullock acknowledged the burden on borrowers while defending the decision: "Some pain now will prevent even worse pain down the track." She also explained that the Board was focused on longer-term price-setting rather than fuel costs alone: "It is critical that we stop expectations for high inflation from becoming embedded in price-setting decisions".

Beyond a single step

This illustration looks at one 0.25 percentage point change in isolation. It does not forecast future rates. The forecasts in the November Statement are conditioned on a market-based cash rate assumption, as at 28 October, that "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028." That is an assumption drawn from market pricing, not a Board commitment, and it cannot be used to predict any lender's rate.

The Board's next scheduled decision is at 2.30 pm on 8 December 2026. Before then, the minutes of the November meeting are due on 17 November and the October monthly CPI indicator on 25 November.

The bottom line

In this illustration, a hypothetical rise from 6.10 to 6.35 per cent adds about $146 a month to a $900,000, 30-year loan — roughly $1,752 a year. The proportional change is about the same as for smaller loans, but the dollar amount is markedly larger, which is why big balances are more sensitive to rate moves. The RBA's October review found most borrowers had buffers and very few were in negative equity, though it predates the November decision, and individual circumstances can differ widely from the median.