The cash rate is the interest rate on unsecured overnight loans between banks and other lenders. The cash rate is set by the Reserve Bank of Australia (RBA) and affects the interest rates banks charge their customers, as well as the rates of interest paid on savings accounts and term deposits. 

Eleven times a year, the RBA meets to decide whether the cash rate should go up, down or remain the same – a decision which affects millions of Australians. The RBA decides what the national cash rate will be on the first Tuesday of every month, with the exception of January.

Changes to the national cash rate often lead to changes in interest rates from banks and other financial institutions. A rising cash rate often leads to increasing interest rates, and cuts to the cash rate can see interest rates fall. 

Lower interest rates can be welcome news to borrowers with credit products, such as home loans, personal loans and car loans. Falling variable interest rates can mean cheaper loan repayments, easing pressure on household budgets, or giving borrowers an opportunity to pay off loans sooner. On the other hand, a rising cash rate can see variable interest rates increase for these loans, potentially leading to financial stress.   

Credit card interest rates aren’t typically affected by changes to the RBA cash rate. This is partially because credit cards are effectively unsecured loans, with higher interest rates required to help cover their higher risk.

Changes to the RBA cash rate can also affect savings products, such as savings accounts and term deposits. If the interest rates rise along with the cash rate, account holders may be able to earn more interest from their savings, growing their wealth faster. But if the cash rate falls and interest rates are cut, you may not earn as much interest on your savings.

Keep in mind that while changes to the cash rate can affect interest rates, it’s not the only factor in play. Banks and financial institutions have multiple funding sources, and may choose to raise or lower their interest rates out of cycle from the RBA. 

The RBA is likely to change the cash rate when macroeconomic factors, such as inflation, wage growth, or unemployment levels, indicate it is necessary. There is no rule for how often it may change.

For example, the RBA has hiked the cash rate a series of times in 2022. Prior to this, the last time the cash rate was was hiked was over a decade earlier in November 2010, when the cash rate rose by 25 basis points to 4.75 per cent.

Further, the RBA cut the cash rate three times in 2020 – a rare two cuts in March 2020 in response to the COVID-19 pandemic and recession, and a partial cut of 15 basis points in November 2020.

Once the RBA has announced the cash rate is moving, lenders will decide whether they intend to pass this change on to their customers. Some banks may make this decision immediately, while others can take days, or even weeks to make an announcement.

One of the easiest ways to keep track of what each lender is doing is by following RateCity on Facebook, Twitter or on this page. RateCity’s RBA Cash Rate Tracker can help you find out when the RBA has changed rates and how it will affect you, including a comprehensive list of which lenders have moved their home loan interest rates following a change to the cash rate. You can also find out which lenders are offering the most competitive interest rates on the market, learn how to refinance your home loan and keep up-to-date of the latest RBA news.

So don’t sit around waiting for an email or a letter from your bank letting you know they’ve moved – our Rate Tracker page is updated as new rates are announced.