Fixed vs Variable › How does the RBA cash rate affect variable rates?

How does the RBA cash rate affect variable rates?

The Reserve Bank sets the cash rate, which strongly influences lenders variable rates, though lenders set their own rates and do not always move in lockstep. When the cash rate changes, variable repayments often follow.

Written by Ross McFarlane, Licensed Mortgage Broker (Credit Representative 526725). About the author

Why this matters

The cash rate is the main lever behind variable rate movements, but it is not the only one. Lenders also weigh funding costs and competition, so they may not pass on changes fully or immediately. Still, the broad direction of variable rates tends to track the cash rate, which is why borrowers watch the Reserve Bank decisions.

The key points

The cash rate strongly influences variable rates.
Lenders set their own rates and may not match exactly.
Variable repayments often follow cash rate changes.
Funding costs and competition also play a part.

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Last reviewed: June 2026

General information only. This page provides general information about home loans and is not financial or credit advice, a quote, or a guarantee, and your personal circumstances have not been considered. Lending policies, interest rates, fees and eligibility vary by lender and change over time. Always confirm your own situation with a licensed mortgage broker or lender before acting. Ross McFarlane (Credit Representative 526725) is an authorised Credit Representative of Australian Associated Advisers Pty Ltd t/a Keylend, Australian Credit Licence 392169.