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Key takeaways
The Reserve Bank of Australia (RBA) interest rate decision is a monthly meeting (excluding January) where the Reserve Bank Board sets the official cash rate target. This rate is the main tool the RBA uses to manage the Australian economy.
The RBA Board meets on the first Monday and Tuesday of February, March, May, June, August, September, November and December. Following the meeting, the RBA announces whether the cash rate will rise, fall or stay on hold.
The Reserve Bank of Australia raises rates to slow down spending and cool inflation. The idea is that if interest rates go up, people and businesses become more reluctant to borrow and spend. This reduces demand in the economy and inflation slows.
On the other hand, if the economy needs a boost, the RBA typically cuts rates to encourage spending and investment. If the economy is steady, they may leave rates on hold.
Predicting when interest rates will go down isn't easy – it depends on factors like inflation and employment data. Economists keep a close eye on RBA announcements for any hints. A rate cut is more likely when inflation falls within the RBA's target range.
While the RBA sets the cash rate, banks decide independently whether to pass these changes on to customers.
If you have a variable rate home loan, your interest rate may move with the cash rate.
With a fixed-rate loan, your interest rate and home loan repayments stay the same for the fixed term, regardless of what the RBA does. This offers certainty for your family budget. When the term ends, the loan usually reverts to a standard variable rate (SVR), which may vary from your fixed rate. Check with your lender for details.
If you're on a variable rate, changes to your repayments don't happen instantly.
Here's the typical timeline:
Small percentage changes can add up over the life of a loan. This table shows the estimated additional monthly cost for 3 common loan sizes if interest rates rise.
| Loan amount | +0.25% rate hike | +0.50% rate hike |
|---|---|---|
| $500,000 | +$75 per month | +$150 per month |
| $750,000 | +$113 per month | +$225 per month |
| $1 million | +$150 per month | +$300 per month |
| Loan amount | $500,000 | $500,000 |
|---|---|---|
| +0.25% rate hike | +$75 per month | +$75 per month |
| +0.50% rate hike | +$150 per month | +$150 per month |
| Loan amount | $750,000 | $750,000 |
| +0.25% rate hike | +$113 per month | +$113 per month |
| +0.50% rate hike | +$225 per month | +$225 per month |
| Loan amount | $1 million | $1 million |
| +0.25% rate hike | +$150 per month | +$150 per month |
| +0.50% rate hike | +$300 per month | +$300 per month |
This table is an example based on 30-year principal and interest repayments and does not show current interest rates. Check with your lender for rates related to your loan.
If you're worried about rising costs, you have options to manage the impact on your budget.
Make sure you're on a competitive rate. If you're an HSBC customer, it's easy to check your current rate:
- Online banking: Log in and select your home loan account.
- Mobile app: Tap your mortgage account in the HSBC Australia Mobile Banking app.
- Home loan statement: Your latest rate is listed on your statement.
If you have trouble keeping up with payments, let us know as soon as you can. We can discuss options to support you, such as:
- Switching to interest-only repayments for a set period (subject to eligibility criteria)
- Extending your loan term to reduce monthly payments
- Accessing hardship provisions if you face financial difficulty
Do home loan interest rates change on the same day as the RBA announcement?
No, there's usually a delay. It can take 20 to 60 days for new repayment amounts to come into effect.
Can I lock in my interest rate?
Yes, you can switch to a fixed rate home loan (subject to your lender's eligibility criteria). This locks in your interest rate and repayment amount for a specific term (for example, 1 or 5 years), protecting you from rate rises during that period.
How do I know if interest rates will go down soon?
Predicting rate cuts isn't easy. However, economists watch inflation trends closely. A rate cut becomes more likely when inflation settles within the RBA’s target range.
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This article is intended to provide general information of an educational nature only. This information should not be relied upon as personal financial product advice as it does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of the information to your own circumstances and seek independent legal and financial advice prior to making any investment choice. There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity.
Disclaimer: Credit provided by HSBC Bank Australia ABN 48 006 434 162. AFSL/Australia Credit Licence 232595. Home Loan Terms (PDF), Personal Banking Booklet (PDF), Fees and Charges (PDF), and lending criteria apply. This article does not take into account your personal or financial situation. Please consider a relevant Product Disclosure Statement, available at hsbc.com.au or by calling 1300 308 008 before making a decision about this product.
