The cash rate is the interest rate banks charge each other on unsecured overnight loans. Australia's current cash rate target is 4.60%, set by the RBA's Monetary Policy Board.
A cash rate move influences home-loan pricing. Your lender's decision determines the change to your own rate and repayment.
What the Cash Rate Means
The cash rate is the interest rate on unsecured overnight loans between banks. The Reserve Bank of Australia (RBA) uses market operations to steer that rate towards its target.
The overnight rate is Australia's near risk-free benchmark for the price of money. Savings accounts and home-loan rates are priced with reference to it, alongside each lender's own costs.
The Current Cash Rate Target
Australia's official cash rate target is 4.60%. The Monetary Policy Board set this level at its latest 2026 increase, after earlier meetings had already raised the target.
The RBA cash rate table records each decision and the target that follows it. Its cash rate history and interactive chart show earlier increases, cuts and holds. Check the latest row for the cash rate today before calculating a client's position.
Who Sets the Cash Rate and How Often
The RBA's Monetary Policy Board sets the cash rate target and meets eight times a year on a published schedule.
Its monetary policy objectives are price stability and full employment. The inflation target is 2 to 3 per cent. Financial stability also informs the RBA's work.
The Board weighs inflation, jobs, household spending and global developments. Its monetary policy explanation sets out these objectives and the decision process.
Cash Rate vs Interest Rate
The cash rate concerns overnight borrowing between banks. A home-loan interest rate is the price a lender charges a borrower under a loan contract.
- The Monetary Policy Board sets the cash rate target. Each lender sets its own product rates and borrower discounts.
- The cash rate applies to overnight interbank loans. A mortgage can run for decades, with a variable rate or a fixed rate for an agreed period.
- The Board makes scheduled decisions. Lenders choose their response and timing, so pass-through can be full, partial or absent.
A lender's pricing reflects its funding mix, including deposits and wholesale borrowing. Capital costs, credit risk and margin targets also affect the rate it charges.
Deposit competition or wholesale funding costs can change between Board meetings. Lenders can therefore move rates out of cycle, as the RBA's funding-cost explainer describes.
How a Change Reaches Your Clients
A cash rate change reaches a client through funding markets, lender pricing and then their loan repayments. Those stages run on different timetables.
Variable-rate repricing often follows within days, but the amount and effective date depend on the lender's notice. Pass-through can be partial.
For the borrower, the variable-rate loan terms and lender notice determine when the new rate applies.
Fixed rates depend on longer-term funding markets and expectations, so they often move before a Board decision. Existing fixed repayments normally continue through the agreed fixed term.
The fixed-rate mortgage guide explains fixed terms and break costs.
For new loans, banks assess repayments above the product rate. The Australian Prudential Regulation Authority (APRA) sets a minimum serviceability buffer of 3 percentage points.
Hypothetically, a 6% product rate produces a 9% assessment rate before any higher lender floor applies. Higher expected rates can reduce borrowing capacity before an advertised rate changes if the lender updates its assessment assumptions.
Use the lender's calculator for the client's loan serviceability assessment. The buffer tests capacity to repay and does not become the rate charged.
Savings rates, business lending and personal loans tend to move in the same direction, with different timing. Rate direction also affects buyer confidence and spending.
Other Economic Figures That Move a Client's File
Economic releases help explain the Board's decisions. For a client file, separate a change in the economic outlook from a change in the lender's assessment or product rate.
| Figure | Primary Source | Possible Effect on a File | Broker Check |
|---|---|---|---|
| Consumer price index (CPI) | Australian Bureau of Statistics (ABS) CPI | Price growth can affect household costs and the rate outlook. | Update the client's actual expenses when they change. |
| Employment and unemployment | ABS Labour Force | Changed hours or employment can affect assessable income. | Confirm the client's employment and current income evidence. |
| GDP and household spending | ABS National Accounts | Economic activity can affect the outlook for a self-employed client's business. | Assess the business's own financial evidence before changing income assumptions. |
| RBA forecasts and analysis | Statement on Monetary Policy | The outlook can change the questions clients ask about rates. | Explain the outlook separately from the client's contracted rate. |
| Lender rate change | The client's lender notice, such as CommBank's rate announcement | The product rate or repayment changes from the lender's stated effective date. | Check the affected product, borrower discount and repayment notice. Rerun the calculator where relevant. |
A US Federal Reserve decision does not set an Australian lender's rate. Rerun a lender calculator when an Australian product rate, assessment policy or client input changes, not solely because of a US announcement.
Broker Habits on Announcement Day
On announcement day, confirm the Board's decision before translating it into a client's repayment. Follow the lender's published change through to the individual loan.
- Read the Board's statement through the RBA cash rate table. Record whether the target rose, fell or stayed unchanged.
- Wait for each lender's repricing notice. Confirm the affected loan products and when the change takes effect.
- Tell each affected variable-rate client their new rate and repayment once the lender's terms are known. Distinguish the interest-rate effective date from the repayment-change date.
Promoting a cut before a lender has published it risks misleading clients. The Australian Securities and Investments Commission (ASIC) addresses misleading credit advertising in RG 234 Advertising financial products and services (including credit).
After the decision, list clients whose rates sit above comparable market pricing. Quantify a switch after fees and any break costs, then start conversations where the numbers justify a review.
Use the mortgage refinancing guide for the checks that follow. Confirm any new repayment against the lender's notice before presenting it as the client's payable amount.
Prepare Before the Next Board Meeting
Prepare the meeting calendar and client communication before the next decision. A short routine gives you time to work through each lender's response.
- Diary the year's remaining dates from the RBA meeting schedule.
- Keep a short client template explaining what a cash rate change can do to their loan. Leave fields for the lender's confirmed rate, effective date and repayment. Explain what stays fixed during a fixed term.
- Audit website and email copy against ASIC's RG 234. Remove claims that promise a lender response or savings before the figures support them.
With the template ready, each decision becomes a planned client conversation. Fill it from the lender's notice and the client's loan details before sending it.
