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Cash Rate at 4.60% – What Borrowers Should Review Now

Cash Rate at 4.60% – What Borrowers Should Review Now

The Reserve Bank of Australia (RBA) has increased interest rates again, adding further pressure to Australian households, property investors and businesses managing existing debt. While another rate rise may prompt borrowers to look for a cheaper loan, refinancing is not necessarily the best immediate response. On 29 September 2026, the RBA increased the official cash rate target by 0.25 percentage points to 4.60%, effective from 30 September. The decision reflects ongoing inflation concerns and follows several increases earlier in the year.

For borrowers, the important question is not simply whether interest rates have risen, but how those changes affect their individual financial position.

Reviewing repayments, cash flow, loan features and refinancing opportunities can help identify whether your existing finance arrangements remain suitable or whether there may be a better alternative.

Why Did the RBA Increase Interest Rates?

The RBA uses the cash rate as one of its primary tools for influencing inflation and economic activity. When inflation remains elevated, increasing interest rates can help moderate borrowing, spending and demand across the economy.

In its September announcement, the RBA highlighted persistent inflation pressures, higher global energy prices and stronger-than-expected recent inflation outcomes. Although the cash rate influences borrowing costs, it is important to distinguish between the RBA’s decision and the interest rate charged by individual lenders.

Banks and other lenders determine their own lending rates, taking into account funding costs, competition, borrower circumstances and their commercial arrangements. Consequently, a 0.25 percentage point cash rate increase does not necessarily translate into an identical increase across every home loan, investment loan or business facility.

How Much Could the Rate Rise Affect Your Repayments?

For borrowers with variable-rate loans, an interest rate increase can result in higher monthly repayments or additional interest costs. The actual impact depends on your outstanding balance, remaining loan term, repayment structure and the rate adjustment applied by your lender.

Consider a household with a $600,000 principal-and-interest home loan, 25 years remaining and an interest rate increasing from 6.00% to 6.25%. Under these illustrative assumptions, monthly repayments would increase from approximately $3,866 to $3,958, an additional $92 per month, or around $1,100 annually.

Although this may appear manageable in isolation, the cumulative impact of several rate increases can place considerable pressure on household budgets. For interest-only borrowers, the immediate effect can be different. A 0.25 percentage point increase on a $600,000 balance represents approximately $1,500 in additional annual interest, assuming the balance remains unchanged.

These examples are illustrative only. Actual repayments depend on lender calculations and individual loan conditions.

Should You Refinance After an Interest Rate Increase?

Refinancing involves replacing an existing loan with another facility, either through your current lender or a different provider. It may provide an opportunity to secure a more competitive interest rate, improve loan features, restructure debt or better align repayments with your financial circumstances. However, a lower advertised interest rate does not automatically mean a better overall loan. Before refinancing, consider the following:

• Interest rates and comparison rates: Assess the total cost of borrowing rather than relying solely on the advertised rate.
• Upfront and ongoing fees: Application, discharge, valuation and account fees may offset potential savings.
• Loan features: Offset accounts, redraw facilities and additional repayment flexibility may be valuable.
• Remaining loan term: Extending your loan could reduce monthly repayments while increasing total interest paid.
• Borrowing capacity: Changes to income, expenses, property values or lender assessment requirements may affect eligibility.
• Security arrangements: Refinancing may require changes to property security, guarantees or existing lending structures.

For example, refinancing a loan with 20 years remaining into a new 30-year facility may improve immediate cash flow but potentially increase total borrowing costs. It is also worth approaching your existing lender before applying elsewhere. They may be willing to review your interest rate or offer a more competitive arrangement without requiring a complete refinance.

Fixed or Variable: Which Loan Structure Is Better?

Following an interest rate increase, borrowers may consider whether fixing their loan could provide greater certainty. A fixed-rate loan generally maintains the same interest rate for an agreed period, making repayments more predictable. However, fixed loans can restrict additional repayments, limit access to certain features and involve break costs if the loan is changed or repaid early.

Variable-rate loans typically offer greater flexibility and may benefit from future interest rate reductions. Conversely, repayments can increase if lending rates rise. A split loan combines fixed and variable components, potentially providing a balance between repayment certainty and flexibility. The appropriate structure depends on your financial objectives, tolerance for repayment changes, expected future expenses and the features you value.

Rather than attempting to predict future RBA decisions, borrowers should consider how different interest rate scenarios would affect their ability to meet financial commitments.

What Should Property Investors Consider?

For property investors, higher borrowing costs can influence cash flow, investment returns and future borrowing capacity. A useful review should consider rental income, operating expenses, loan repayments and the financial buffer available for vacancies, repairs or unexpected costs.

Investors should also assess whether their current interest-only or principal-and-interest arrangements remain appropriate. Importantly, refinancing investment debt requires consideration of the original borrowing purpose and loan structure, particularly where personal and investment borrowings are involved. Maintaining clear loan records and seeking appropriate tax advice can help avoid unnecessary complications.

For specific advice concerning your property investment strategy, including reviews of your existing portfolio, our Property Investment Advice service may be a good fit for you. You can book your complimentary 15-minute consultation here.

How Can Businesses Respond to Higher Borrowing Costs?

Interest rate movements can also affect business loans, commercial property finance, equipment funding and working-capital facilities. For business owners, reviewing finance should extend beyond the interest rate itself. Consider whether cash-flow forecasts adequately account for higher repayments, whether sufficient working capital remains available and whether existing facilities provide the flexibility needed for upcoming expenditure.

Businesses planning equipment purchases, expansion or property acquisitions may benefit from reviewing the timing and structure of proposed borrowing. A finance review can also help identify facilities that no longer suit the business’s current operating requirements.

Use the Rate Rise as an Opportunity to Review Your Finance

While the September RBA decision to bring the cash rate to 4.60%  increases pressure on some borrowers, it also provides a useful reminder to review lending arrangements that may have remained unchanged for several years. Understanding your current interest rate, repayment obligations, loan features and available alternatives can help you make decisions based on your broader circumstances rather than reacting to headlines.

At McKinley Plowman, our Finance team works with individuals, property investors and business owners to assess existing lending, explore refinancing opportunities and structure  finance around their financial objectives. Whether you are reviewing a home loan, considering an investment property or managing business borrowing, our team can help you understand the options available. To discuss your finance arrangements, contact McKinley Plowman or call (08) 9301 2200.

General Information Disclaimer: This article provides general information only and does not take into account your personal objectives, financial situation or needs. Lending conditions, interest rates and eligibility requirements vary. Consider obtaining appropriate professional advice before making financial decisions.

written by:

Paul Moran

Paul has over 35 years of experience in finding financial solutions for homebuyers, investors and business owners.
A licensed broker and member of the Mortgage & Finance Association of Australia (MFAA), Paul’s extensive experience includes 20 years with a major bank, seven of which were as commercial banking manager.
Paul delivers a holistic financial solutions to achieve the best possible outcome for a client’s personal or commercial lending needs. Paul also provides a comprehensive financial consultancy to business owners on commercial, equipment and invoice finance.