The short answer
A 0.25% rate rise adds about $97 a month to a $600,000 loan on a 30-year principal-and-interest term, and about $162 on $1,000,000. Every extra dollar goes to interest, not to paying the loan down - and interest-only borrowers wear the full rise with nothing absorbed.
From the RBA to your repayment #
The Reserve Bank sets one number: the cash rate target, currently 4.35%. It last moved on 5 May 2026 - the third of three consecutive 0.25% rises since February - and has been held twice since, most recently at the 11 August 2026 meeting. It is the interest rate banks pay each other for overnight funds, and it anchors the cost of almost all bank funding. When it moves, lenders reprice variable home loans - historically within two to four weeks, and usually by the full amount of the change.
The chain matters more than the headline. The RBA moves the cash rate in response to inflation data (annual CPI was 3.8% to June 2026, still above the 2-3% target band), lenders move variable rates in response to the RBA, and your repayment moves with your lender. Fixed-rate loans skip the chain until the fixed term ends, which is why the average repayment response lags the headline by months.
None of this requires prediction. The mechanics are fixed; only the timing is uncertain. What follows is the arithmetic of one 0.25% step, which you can scale to any move.
What 0.25% actually costs #
Here is one 0.25% rise, from 6.10% to 6.35%, on a 30-year principal-and-interest term. The repayment formula is not linear in the rate, so the cost per 0.25% grows slightly as rates rise - but as a working rule, each 0.25% adds about $80 per month per $500,000 borrowed.
| Loan | At 6.10% | At 6.35% | Extra per month | Extra per year |
|---|---|---|---|---|
| $500,000 | $3,030 | $3,111 | +$81 | +$974 |
| $600,000 | $3,636 | $3,733 | +$97 | +$1,169 |
| $750,000 | $4,545 | $4,667 | +$122 | +$1,462 |
| $1,000,000 | $6,060 | $6,222 | +$162 | +$1,949 |
Monthly repayments, 30-year P&I term, computed by the CalnetProperty loan engine. Assumes the lender passes on the full 0.25%.
The repayment curve on $600,000
30-year P&I. Highlighted bars: the worked example, 6.10% and 6.35%.
Three rises in 2026 so far means a borrower on $600,000 who started the year at 5.35% is paying about $285 more each month - $3,426 a year, after tax.
Why rises sting most in the early years #
In the first years of a loan, most of each payment is interest. On $600,000 at 6.10%, the first monthly payment of $3,636 contains $3,050 of interest and only $586 of principal. A rate rise increases the interest component only - so the entire increase lands on the part of the payment that does not build equity.
Where the first payment goes
The rise is absorbed entirely by the interest share.
Twenty years in, the balance is far lower, the interest share is smaller, and the same 0.25% move costs less in dollars. This is why headlines about rate rises are really headlines about recent borrowers: the pain concentrates in the first third of the loan, when balances are at their peak. The repayment calculator draws this crossover for your own balance and rate.
Interest-only loans feel it hardest #
An interest-only payment is simply balance x rate / 12. There is no amortisation formula to soften the move: a 0.25% rise on a $600,000 IO loan adds exactly $125 a month, and the percentage jump in the payment is larger than on P&I because the base payment is smaller. At 6.10% the IO payment is $3,050; at 6.35% it is $3,175 - a 4.1% increase in one step.
For investors the interest component is the tax-relevant part - but since the May 2026 reform, what it deducts against depends on your acquisition class. Grandfathered purchases keep negative gearing against salary; post-reform established purchases quarantine losses against rental income from 1 July 2027. A rate rise therefore hits post-reform established buyers hardest in after-tax terms: the extra interest deepens a loss they cannot use this year. The negative gearing calculator computes your class and what the extra interest actually does to your tax position.
You were stress-tested for this #
Since November 2021, APRA has required lenders to assess every new loan at the product rate plus at least 3.00 percentage points. A borrower who took a 6.10% loan was approved on the maths of 9.10%. Today's rises are, in a literal sense, inside the test you already passed - the buffer is the regulator's answer to exactly this scenario.
The 3% buffer means a borrower approved at 6.10% was assessed on repayments of $4,871 a month on $600,000 - $1,235 above the actual starting repayment.
The buffer also works in reverse: it is why borrowing capacity shrinks as rates rise, since the assessment rate rises with the product rate. The borrowing power calculator shows the machinery banks run, buffer included.
What investors actually watch #
Rate moves are announced eight times a year at scheduled RBA board meetings. The Board held the cash rate at its August meeting for a second consecutive time, and the next decision lands on 29 September 2026. The inputs the board reads are public weeks earlier - the monthly CPI indicator (currently 3.8% annual, with the trimmed mean at 3.6%), labour force data, and wage growth. Reading the CPI print is usually a better guide to the next move than reading commentary about it: our CPI decoder covers how.
For a portfolio, the useful discipline is not forecasting the next move but knowing your own numbers under the next two: what your repayment becomes at +0.25% and +0.50%, whether rent covers it, and how far your buffer or offset extends. An offset balance blunts a rise dollar for dollar - the offset calculator shows by how much. Those are checks against your criteria, not predictions about the RBA's.
Run your own numbers
Every figure here comes from the engine behind the repayment calculator. Put your own inputs in and test the result against your criteria.
Frequently asked questions
How much does a 0.25% rate rise add to my mortgage repayment?
On a 30-year principal-and-interest loan, a 0.25% rise adds roughly $80 a month per $500,000 borrowed. Computed exactly: $81 a month on $500,000 (6.10% to 6.35%), $97 on $600,000, $122 on $750,000 and $162 on $1,000,000. On interest-only loans the arithmetic is simpler: 0.25% times the balance, divided by 12 - $125 a month per $600,000.
Do banks have to pass on RBA rate rises?
No. Variable rates are set by each lender, and the cash rate is only their anchor. In practice most lenders have passed on recent rises in full within two to four weeks, but the margin between the cash rate and advertised variable rates changes over time - which is also why refinancing conversations tend to spike after each rise.
When does a rate rise actually hit my account?
Three dates matter: the RBA decision, your lender's effective date for the new rate (typically one to two weeks later), and your repayment reset date. Most lenders give at least 20 to 30 days' notice before the higher direct debit starts, so the cash impact usually lands one to two months after the announcement.
Does a rate rise affect interest-only loans more?
In percentage terms, yes. An interest-only payment is balance times rate divided by 12, so a rise from 6.10% to 6.35% lifts the payment by 4.1% in one step, versus about 2.7% on a comparable principal-and-interest loan. The dollar increase is similar; the smaller base makes the jump feel sharper.
Is the extra interest from a rate rise tax deductible?
For an investment property, interest is generally deductible - but since the May 2026 reform, what it deducts against depends on your acquisition class. Grandfathered purchases (contracted before 7:30pm AEST, 12 May 2026) keep deductions against all income. Post-reform established purchases quarantine losses to rental income from 1 July 2027, and new builds remain exempt. The extra interest from a rise deepens whichever position you are in.