How a 0.25% Rate Rise Changes Repayments, by Loan Size

Key takeaways

• The rule of thumb: $16 per month, per $100,000, per 0.25% — accurate to within a couple of dollars between 5% and 8%.
• The dollar impact scales with the balance, not with your income, which is why the same hike is trivial for one household and decisive for another.
• Three hikes in 2026 (February, March and May) took the cash rate to 4.35%.
• Borrowers who kept repayments at their old level after the 2025 cuts absorbed the 2026 hikes without changing their budget.

What does one hike cost, by loan size?

Moving from 6.50% to 6.75% on a 30-year principal-and-interest loan:

What did the full 2026 cycle add?

Three increases through February, March and May 2026 lifted the cash rate to 4.35%. Assuming full pass-through, that is 0.75 points, or three times the single-hike figures above:

For a household on $150,000 gross, the $750,000 figure is roughly an extra 4% of pre-tax income redirected to the mortgage in a single year.

Why does the rule of thumb hold?

Over a long term the repayment is close to linear in the interest rate, because the discount factor changes slowly. Between about 5% and 8% on a 30-year loan, each 0.25 point step costs $15 to $17 per $100,000 — near enough to $16 for mental arithmetic.

The approximation degrades on short terms. On a 10-year loan the same step costs only about $12 per $100,000, because there is less remaining time for the higher rate to apply.

What should you do before the next decision?

The RBA Board's next decision is due 11 August 2026. Three practical steps:

• Model the next hike, not the last one. Add $16 per $100,000 to your current repayment and check it against your actual budget.
• Check your rate against new-customer pricing. The gap between what existing and new borrowers pay is often worth more than a single hike.
• Keep repayments high if a cut arrives. Households that did this through 2025 entered the 2026 hikes with a buffer already built.

Frequently asked questions

Do lenders always pass on the full cash rate move?

No. Lenders set their own variable rates and fund themselves from a mix of deposits and wholesale markets, so pass-through varies by lender and by product. Announcements also differ in timing, commonly taking effect two to four weeks after an RBA decision.

Does a rate rise change my repayment automatically?

On a variable loan, yes — the lender recalculates your repayment over the remaining term and notifies you. On a fixed loan nothing changes until the fixed period ends, at which point the loan reverts to the variable rate then applicable.

What if I cannot afford the increase?

Contact your lender before missing a payment. Australian lenders are required to consider hardship applications under the Banking Code of Practice, and options include a temporary repayment pause, a term extension or a switch to interest-only. Free financial counselling is available through the National Debt Helpline.

Related reading

• The Home Loan Repayment Formula, Worked Step by Step
• Amortisation Schedules: Reading Your First 12 Months

Sources

• Cash rate target decisions and Board minutes — Reserve Bank of Australia
• Banking Code of Practice, financial hardship provisions — Australian Banking Association