Key Highlights

  • Under the stated assumptions, a 25-basis-point rise lifts monthly repayments on a $650,000 loan from about $3,981 to about $4,087.
  • The illustration uses assumed rates of 6.20 and 6.45 per cent, not actual lender rates, and is not an RBA forecast.
  • Real borrowers may see different outcomes depending on loan balance, fixed rates, offset balances and lender pass-through.

A worked example shows how a hypothetical 25-basis-point increase could flow through to monthly repayments, while the Reserve Bank's 3 November decision remains undecided.

Mortgage holders have already absorbed four increases in the cash rate target in 2026. The most recent, on 29 September, took the target to 4.60 per cent, effective 30 September, and lifted the cumulative increase for the year to 100 basis points, or one percentage point. The Monetary Policy Board meets again on 2–3 November, with its decision due at 2.30 pm (AEDT) on Tuesday 3 November, which is also Melbourne Cup Day.

Nobody outside the Board knows what it will decide. Governor Michele Bullock said at her media conference on 29 September, "I'm not going to give you forward guidance." What the Board has said, in its September statement, is that it remains open to "increasing the cash rate target further if needed". That leaves borrowers with a reasonable question: if rates did go up again, what might it look like in dollar terms?

This article answers that with a clearly labelled illustration. It is not a forecast of the Board's decision, it is not prepared by the Reserve Bank, and the interest rates used are assumptions chosen for the arithmetic, not actual lender rates.

The illustration: assumptions and results

The illustration below uses a standard principal-and-interest (P&I) amortisation formula, the same method used to calculate a fixed schedule of monthly repayments that pays off a loan in full by the end of its term.

Illustration — assumptions (not actual lender rates):

  • Loan amount: $650,000
  • Loan type: variable rate, principal and interest
  • Term: 30 years (360 monthly repayments)
  • Starting assumed interest rate: 6.20 per cent a year
  • Assumed rate after a hypothetical 25-basis-point rise passed on in full: 6.45 per cent a year
  • Interest calculated monthly (annual rate divided by 12)

Illustration — results:

  • Monthly repayment at an assumed 6.20 per cent: about $3,981.05
  • Monthly repayment at an assumed 6.45 per cent: about $4,087.09
  • Difference: about $106.04 a month, or roughly $1,272.52 over a year

If the assumed rate were held unchanged for the full 30 years, total interest paid would be roughly $783,177 at 6.20 per cent and roughly $821,353 at 6.45 per cent, a gap of about $38,176 across the life of the loan. In practice, variable rates rarely stay fixed for three decades, so that lifetime figure is best read as a measure of sensitivity rather than an expected outcome.

Why the figures may differ for real borrowers

A worked example like this is deliberately tidy. Actual households sit in very different positions, and several factors could make the real-world effect larger or smaller.

  • Loan balance and remaining term. A borrower who has already paid down part of the loan, or who has fewer years left to run, would see a different dollar change.
  • Lender pass-through. The illustration assumes a cash rate rise is passed on in full to the variable rate. Lenders set their own rates.
  • Fixed-rate loans. Borrowers on fixed rates would not see an immediate change to repayments until their fixed period ends.
  • Offset and redraw balances. Money held in an offset account reduces the balance on which interest is charged.
  • Interest-only loans. Repayments on interest-only loans respond differently from the P&I example above.

A change to the cash rate takes time to show up in repayments, as lenders adjust and as households respond. The Governor told the Senate Economics Legislation Committee on 28 October that the full effects of recent rate rises are yet to be felt.

What the RBA says about household resilience

While the illustration focuses on one hypothetical loan, the Reserve Bank's own assessment of mortgage holders in aggregate comes from its Financial Stability Review, released on 1 October 2026 with a data cut-off of 25 September.

The Review found that "Most Australian households with mortgages remain well placed to manage more difficult conditions". It estimated that around 2 per cent of variable-rate owner-occupiers have a cash-flow shortfall, a share projected to stay a little under 2 per cent and well below its 2024 peak. The median borrower can cover more than a year of scheduled payments from buffers, and less than 1 per cent of borrowers are estimated to be in negative equity.

Arrears of 90 days or more increased a little over the year to date, to around pre-pandemic levels, and the share of borrowers in formal hardship increased but remains low.

Assistant Governor (Economic) Sarah Hunter made a similar point on 60 Minutes, broadcast on 25 October. She said most borrowers entered this period with buffers such as offset savings and that the RBA is not seeing systemic mortgage stress. "We're not seeing signs of lots of people having to sell their home because that's putting them into financial stress," she said. She added: "We're not trying to put people out of their homes."

The Governor, for her part, has acknowledged the strain at an individual level. "Those who have mortgages, yes, this clearly impacts them and it hurts them," Ms Bullock said on 29 September. "But at an individual level, yes, there are households that are hurting."

The inflation backdrop to the decision

The question of whether rates move again sits against the latest inflation data. The Australian Bureau of Statistics reported on 28 October that headline CPI rose 4.3 per cent in the 12 months to September 2026, up from 4.0 per cent in August. The trimmed mean, the underlying measure, rose 3.6 per cent. Both sit above the RBA's 2–3 per cent target range, which uses the 2.5 per cent midpoint as its reference.

Ms Bullock told senators that "Inflation will therefore likely be higher than was our base case in August," citing global energy prices that are "now much higher than had been assumed in the August forecasts". She also said: "But we can't allow high inflation to persist."

The Board will release its decision and a new Statement on Monetary Policy, with fresh forecasts, at 2.30 pm on 3 November, followed by the Governor's media conference at 3.30 pm.

The bottom line

Under the stated assumptions, a hypothetical 25-basis-point rise on a $650,000, 30-year variable P&I loan would lift monthly repayments by about $106, from roughly $3,981 to roughly $4,087. That figure is an illustration only, built on assumed rates rather than any lender's pricing, and it says nothing about what the Board will decide on 3 November. Borrowers may wish to understand how their own loan balance, term, rate type and offset savings would change the numbers, and it is worth knowing that the RBA's latest stability assessment found most mortgage holders well placed, even as some individual households are hurting.