Four of Australia's major banks now expect the Reserve Bank board to lift the cash rate by 25 basis points to 4.60 per cent when it meets on Monday, and the market has roughly a 90 per cent chance of that move priced in. The decision is due at 2.30pm AEST. The cash rate has sat at 4.35 per cent since 12 August.
For anyone with a variable home loan, the number that matters isn't 4.60. It's what the debit looks like the fortnight after the announcement.
What 25 basis points costs
A basis point is one hundredth of a percentage point. Twenty-five of them on an outstanding balance is straightforward arithmetic: $250 a year for every $100,000 owing, or a bit under $21 a month.
Stack that against the past two years and the household bill compounds. The cash rate was 4.35 per cent before Monday; it was 0.10 per cent in April 2022. A borrower who took out a $600,000 loan at the start of the tightening cycle has already absorbed several hundred dollars a month in repricing. Monday adds another increment on top.
Offset accounts, redraw and extra repayments blunt the hit, because interest is calculated on the net balance. Borrowers who have been rounding repayments up tend to feel a 25 basis point move as a smaller change to their scheduled debit. Borrowers sitting exactly on schedule feel all of it.
Who passes it on, and how fast
Variable rates are set by the lender, not the RBA. In past tightening cycles the majors have announced changes within hours of the 2.30pm decision and applied them to existing variable loans within one to two weeks, usually from the next scheduled repayment. Smaller lenders and some broker-channel products have moved faster; a handful have absorbed part of a move to protect volume.
Two details are worth checking on your own statement. The first is whether your rate is a discounted variable tied to a headline rate the lender publishes, or a fixed discount off it. The second is whether the loan is principal and interest or interest-only, because interest-only repayments move more sharply in dollar terms for the same balance.
Fixed-rate borrowers get a delay, not an exemption
If your rate is fixed, Monday changes nothing on your statement until the fixed term rolls off. That is where the risk sits: borrowers who fixed in 2021 and 2022 at rates starting with a two or a three face a reversion to whatever the variable rate is at the time. Every 25 basis point rise between now and then widens that gap.
Serviceability rules offer some cushion. Since late 2021, lenders have had to assess new borrowers at their actual rate plus a 3 percentage point buffer, so a loan written at 5.9 per cent was stress-tested near 8.9 per cent. That protects the lender's book more than it protects a household already running tight on groceries and insurance.
If you can't make the new repayment
Call the lender before the direct debit bounces, not after. Under the Banking Code of Practice, lenders have to consider a hardship application — a temporary reduction, a pause, or a restructure — and they can't simply refuse to discuss it. Missed direct debits typically attract a fee, and the account slides into arrears.
The bigger cost is the credit file. A default can be listed once a repayment is 60 days overdue and the amount is $150 or more, and it generally stays on the file for five years. That is the part that follows a household to its next loan application. Hardship arrangements that are being honoured usually aren't listed as a default, which is one more reason to make the call early.
What to watch on Monday
The decision itself is close to fully priced. The statement and the governor's press conference matter more, because they set expectations for whether this is one move or the start of a sequence. Westpac's economists are split on the call; Commonwealth Bank has pushed its forecast for cuts out to August 2027.
August labour force data — unemployment at 4.6 per cent, participation at 67.1 per cent, 39,500 jobs added but full-time employment down 6,300 — is the backdrop that pushed the banks to flip after Governor Michele Bullock's CEDA speech on 22 September. If the board lifts on Monday and signals more, the arithmetic above repeats. If it lifts and stops, the household bill settles at a new level and the next question becomes when it starts coming down. CBA's answer, for now, is not until late 2027.