The Reserve Bank changes one number eight times a year, and that number shapes what you pay on a loan from a completely different institution.
The mechanism is less mysterious than it looks. It’s also less direct than most coverage implies, which is why a rate cut doesn’t always show up in your repayment.
Where the cash rate starts
The cash rate is the interest rate banks pay to borrow from each other overnight. That’s the whole definition. It isn’t a mortgage rate, a savings rate, or a rate any household is charged.
Australia’s Monetary Policy Board sets it eight times a year, meeting over two days and announcing at 2:30pm on the second. Our RBA rate tracker carries the current rate and the full decision history.
What makes this one number powerful is that it sets the floor for what money costs across the system. Change the price banks pay to fund themselves overnight, and you change the arithmetic on everything they lend and everything they pay depositors.
How it reaches your loan
Banks fund their lending from a mix of sources: customer deposits, wholesale borrowing on domestic and international markets, and short-term cash markets. The cash rate directly prices the last of those and indirectly influences the rest.
When funding costs rise, lenders face a choice between absorbing the increase and passing it on. They mostly pass it on, but not evenly and not immediately.
- Variable rate loans move at the lender’s discretion, usually within a few weeks of a decision.
- Fixed rate loans don’t move at all once set. The cash rate changes what’s offered to new borrowers, not what you already locked in.
- Savings and term deposits typically move by less, and often later.
Why banks don’t pass it all on
This is where the frustration usually sits, and the answer is that the cash rate is one input among several.
A lender competing hard for new deposits may need to pay savers more, which offsets the benefit of a cut. Wholesale funding is priced by international markets rather than the RBA. Competition for new borrowers can push a lender to hold a rate lower than its costs justify, and margin pressure elsewhere can push it the other way.
The practical consequence: your rate is set by your lender, not by the RBA. Two lenders facing the same cash rate will offer different rates to the same borrower, and the gap between them is usually larger than the size of a typical rate move. That gap is worth more attention than the announcement itself.
What the Board is watching
Rate decisions follow the data rather than the calendar. The Board weighs inflation against employment, with a mandate covering both price stability and full employment.
Inflation running above target argues for higher rates, which cool spending by making debt more expensive. A weakening labour market argues the other way. Global conditions matter too: through 2026 the Board has pointed to oil supply disruption and Middle East conflict as sources of inflation it can’t control domestically but must still respond to.
Rates rose across the first half of 2026 before the Board held in June. Talk of future moves does some of the work on its own, because expectations change borrower and business behaviour before any decision is announced.
What this means for borrowers
Four things worth doing regardless of which way rates are heading.
Know your rate, not just the cash rate. The number that matters is what your lender charges you, and whether it’s competitive against what that same lender offers new customers.
Keep a buffer. Funds in an offset or redraw absorb a rate rise without forcing a change to your spending.
Don’t wait for an announcement to review. Lenders reprice between decisions, and the biggest saving available to most borrowers is switching from an uncompetitive rate, not catching a cut early.
Understand what happens when a fixed term ends. Rolling onto a revert rate is one of the more expensive defaults in lending, covered in our guide to what to do when a fixed rate expires.
If your rate hasn’t been checked in a year, it’s probably no longer the rate that lender would offer you today. Contact us and we’ll tell you where yours sits against the market. AGS brokers work from all six offices, and coordinate with the financial planning team where the rate environment affects your investment strategy as well as your loan.
Frequently asked questions
How often does the RBA decide on interest rates? Eight times a year. The Monetary Policy Board meets over two days and announces the decision at 2:30pm on the second day. In 2026 the meetings fall in February, March, May, June, August, September, November and December.
Why didn’t my lender pass on the full rate cut? The cash rate is one input into a lender’s funding costs, not the whole picture. Deposit competition, wholesale funding and margin decisions all feed in, so lenders routinely pass on part of a move, or pass it on later.
Does the cash rate affect fixed rate loans? Not once you’ve fixed. Your rate is locked for the term. It affects the fixed rates on offer to new borrowers, which is why the fixed rates advertised today can differ from the one you locked in two years ago.
Do savings rates move with the cash rate too? They do, though usually by less and often more slowly than loan rates. The gap between what a bank charges borrowers and pays depositors is where it earns its margin.