Three of the Big Four Now Tip a Rate Rise: What 0.25% Would Cost You
The cash rate has been 4.35% since November 2023. NAB tips a hike on 29 September. Here is what a 0.25% move does to real repayments, plus the tax angle.
The cash rate has not moved since November 2023. That is close to three years of the same number, long enough that plenty of borrowers have stopped watching the Reserve Bank calendar altogether.
It is worth watching again. On 11 August the Reserve Bank of Australia held the cash rate at 4.35% for yet another meeting, but the tone shifted. The Board said inflation is still too high, and the Governor left the door open to a rise. In the weeks since, three of the four big banks have moved their forecasts to a hike.
The next decision lands at 2.30pm AEST on Tuesday 29 September. Here is what is actually going on, and what a 0.25 percentage point move would mean in dollars on your loan.
Why the mood changed
The trigger is inflation that will not finish the job.
The Australian Bureau of Statistics reported that consumer prices rose 3.5% over the year to July 2026, down from 3.8% over the year to June. On its own, that looks like good news.
The problem is the second number. Trimmed mean inflation, which throws out the biggest price rises and falls at each end so that a one-off jump in something like fuel does not distort the picture, sat at 3.6% over the year to July. That is exactly where it was a month earlier. It has not budged.
The Reserve Bank targets inflation of 2 to 3%, and the trimmed mean is the measure it leans on most heavily. Housing was the largest single contributor to the annual figure, up 5.0%.
The number that fools everyone
Headline inflation falling does not mean a rate cut is coming. The Reserve Bank watches the trimmed mean, and in July it went nowhere. A falling headline figure with a stuck underlying figure is precisely the combination that keeps rates on hold, or pushes them up.
What the big four are forecasting
Bank economists are split, which tells you how genuinely uncertain this is:
- NAB has shifted to a 25 basis point rise in September, which would take the cash rate to 4.60%, with the risk of another in November.
- CBA expects a 25 basis point rise to 4.60%, but in November rather than September.
- ANZ also expects a November rise to 4.60%.
- Westpac expects no rise at all this year, and pencils in cuts during 2027.
So two of the four think nothing happens on 29 September. A basis point, by the way, is one hundredth of a percentage point, so 25 of them is the standard 0.25% move.
These are forecasts, not facts, and they get revised the moment new data lands. Treat them as a reason to check your own position, not as a prediction to bet the house on.
What 0.25% actually costs
Percentages are easy to shrug at. Dollars are not.
Take a $600,000 loan with 25 years left, principal and interest, at 6.00%. The monthly repayment is about $3,866. Lift the rate to 6.25% and it becomes about $3,958.
That is roughly $92 a month, or about $1,107 across a year, from one 0.25 percentage point move. Scaled to other loan sizes on the same 25-year term:
- $500,000 owing: about $77 more a month
- $600,000 owing: about $92 more a month
- $750,000 owing: about $115 more a month
There is a rule of thumb hiding in those numbers. On a 25-year loan, each 0.25 percentage point costs you roughly $15 a month for every $100,000 you still owe. Two rises in a row on that $600,000 loan would be about $185 a month, or around $2,225 over a year.
One practical note: lenders are not obliged to pass on exactly 0.25%, and they normally give notice before the higher repayment starts. A late-September decision often does not reach your account until October or November.
The tax angle most rate coverage skips
Interest you earn in a savings account is income. Your bank reports it to the ATO, it pre-fills into your tax return, and you pay tax on it at your marginal rate, which is the rate on your last dollar earned. Interest you avoid paying by keeping money in an offset account is not income at all, so there is nothing to tax.
Run $30,000 through both. Sitting in an offset against a 6.00% loan, that money saves you $1,800 of interest over a year, and you keep every cent of it.
Sitting in a savings account paying 4.50%, the same $30,000 earns $1,350. If you earn between $45,001 and $135,000 in 2026-27, your marginal rate is 30% plus the 2% Medicare levy, so $432 goes to tax and you keep about $918.
Same money, an $882 gap in a single year. To match a 6.00% offset after tax at that marginal rate, a savings account would need to pay about 8.82% before tax. Nothing pays that.
A rate rise makes your offset better, not worse
If the cash rate goes up and your loan rate follows, every dollar sitting in your offset starts saving you more, automatically, and still tax free. It is the one part of a rate rise that quietly works in your favour.
Five things worth doing before 29 September
None of this requires you to guess what the Board will do.
- Find your actual rate. Not the one you signed up to, the one on your latest statement. Introductory discounts fade, and plenty of borrowers are quietly paying more than their own lender advertises to new customers.
- Ask for a better one. A short call to the retention team with a competitor rate in hand is some of the best-paid ten minutes in personal finance.
- Stress test yourself at plus 0.50%. If two rises would break the budget, you want to know that now rather than in December.
- If you have both an offset and a savings account, move idle cash to the offset. The tax treatment alone usually settles the argument.
- If you are a saver rather than a borrower, check your rate has not dropped after a bonus introductory period ended, then set aside a share of the interest for tax.
And resist fixing your rate purely because a forecast rattled you. Fixing is a trade, not a shield: most fixed loans limit extra repayments and offset access, and the fixed rates on offer already reflect what lenders expect the cash rate to do. It can be the right call for someone who genuinely needs certainty. It should not be a reflex to a headline.
Put your own loan into the mortgage repayment calculator at 6.00% and again at 6.25%, and you will have your real number in about twenty seconds.
FAQ
What is the cash rate, and why does it change my mortgage?
It is the interest rate banks pay to borrow from each other overnight, and the Reserve Bank sets a target for it. It shapes what banks pay for funding, so when it moves, variable home loan and savings rates usually follow. Lenders set their own rates though, and are not required to pass a change on in full, or at all.
If the RBA raises rates on 29 September, when would my repayment change?
Not straight away. Lenders typically announce their move within days, apply the new interest rate a couple of weeks later, and give notice before the higher repayment kicks in. In practice, a late-September decision usually shows up in repayments during October or November.
Is money in an offset account taxed?
No. An offset reduces the interest you are charged rather than paying you interest, so there is no income to declare. Interest from a savings account is taxable and is pre-filled into your return from your bank's data, so leaving it off is not an option.
Should I fix my home loan before the decision?
There is no general answer, and this is general information rather than financial advice. Fixed loans buy certainty but usually cap extra repayments and restrict offset access, and the fixed rates on offer already price in what lenders expect. Weigh the certainty against the flexibility you would give up, and get licensed advice if the decision is a large one.
Run your own numbers