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Back to Inspo & Advice You are reading: What Is the Cash Rate & What Does It Mean for Home Buyers?

Key Insights

  • The Reserve Bank of Australia (RBA) sets Australia’s official cash rate.
  • This rate plays a pivotal role in shaping the interest rates for various financial products, from loans to savings accounts.
  • When the RBA adjusts the cash rate, it has a ripple effect on the interest rates we encounter daily. Whether it’s the mortgage on our homes, the interest on personal loans, or even our credit card debt, these changes matter.


Ever wondered what the fuss is about with the RBA Cash Rate and how it impacts you? We’ve got the scoop! 🤓


What is the Cash Rate?

The cash rate is the interest rate on unsecured overnight loans between banks. This rate plays a pivotal role in shaping the interest rates for various financial products, from loans to savings accounts.


What is the current Cash Rate in Australia?

As of this moment, it stands at 4.35%

For the most up to date cash rate click here


Who are The Reserve Bank of Australia?

The Reserve Bank of Australia (RBA) sets Australia’s official cash rate in their monthly board meetings, which happen on the first Tuesday of the month (except for January).


How often does the RBA change the cash rate?

The RBA has the power to change the cash rate monthly, but that doesn’t mean they will! The huge increase in May 2022 was the first time the cash rate was changed in more than a year. Ideally the RBA would like the cash rate to stay stable as it would mean no inflation! The reason the cash rate was increased so often through 2022 and 2023 is entirely due to severe inflation that initially started during the pandemic. More recently (November 2023) the RBA was forced to raise the cash rate further to 4.35% and may have to increase it further if inflation continues to stay out of hand.


What happens when the cash rate increases?

When the RBA cash rate is high, it often leads to higher interest rates on things like car loans, home loans, personal loans, savings accounts, and term deposits. Property owners may feel the pinch, potentially affecting people’s mortgage repayments and rental prices as landlords adjust to cover their expenses.


What happens when the cash rate decreases?

A low cash rate can mean lower interest rates, making it more affordable for property owners to purchase or invest and which can ease the pressure on rental prices. 💹


What impacts the decision to rise or reduce the cash rate?

If the Australian economy is strong and demand is high, the RBA may raise the cash rate to keep inflation in check. In a weak economy with low demand, the RBA may lower the cash rate to encourage spending and investment. 🤑

The RBA takes into account various factors when deciding whether to change the cash rate:

  • Economic Growth: If the Australian economy slows down, the RBA may lower the cash rate to stimulate demand, encouraging spending and borrowing.
  • Employment: Employment rates are crucial indicators of economic health. In the face of rising unemployment, the RBA might lower interest rates to boost spending, investment, and job creation.
  • Inflation: The RBA aims for a flexible medium-term inflation target of 2-3%. If inflation rises above this range, the RBA may raise the cash rate to strengthen Australians’ purchasing power.
  • International Economy: Global economic conditions also influence the RBA’s decisions, impacting conditions in Australia.

The RBA reviews the cash rate target every month (except January), analysing the state of the Australian economy and deciding whether to maintain, increase, or decrease the cash rate.


How does the RBA Cash Rate impact you?

The RBA cash rate isn’t just about loans – it has a ripple effect across the economy, influencing employment rates, inflation, and investment, which, in turn, can shape housing supply, demand, and rental market dynamics.

For those in the property market or who are thinking about purchasing soon, the cash rate plays a vital role. When the cash rate goes up, you might experience higher mortgage repayments, affecting your budget and housing affordability. 😵 Where with a lower cash rate, it can bring relief to homeowners, making mortgage payments more manageable.

Beyond housing, the cash rate affects our savings, investments, and general economic confidence. Lower rates may encourage spending (got to love shopping sprees), potentially boosting the economy and job market. However, they can also mean reduced returns on savings accounts and investments.


Understanding the RBA cash rate empowers us to make informed financial decisions, whether it’s saving for the future, investing wisely, or planning for your property move. At Easystart Homes, we’re here to help you navigate these choices and make your home ownership dreams a reality.