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Buying a home

How does the RBA influence your home loan interest rate?

28 January 2022

You might have heard the Reserve Bank of Australia, or RBA, mentioned when interest rates and house prices are talked about. This is because the RBA sets the cash rate, which is an interest rate banks pay on money they borrow from other banks.

Understanding the cash rate

The RBA is Australia’s central bank. It’s responsible for keeping Australia’s economy healthy by printing and issuing our currency, taking care of monetary policy, and finding ways to safeguard Australia’s financial system.

One way the RBA maintains a strong financial system in Australia is by setting Australia’s official cash rate. The cash rate is the name given to the interest rate on very short-term loans made between banks. It’s also called the overnight money market interest rate.

Although this rate is only available to banks, it influences the rates all consumers and businesses pay – including the interest rate on your home loan.

How lenders set interest rates

Although the cash rate is an important benchmark for banks and other lenders when they’re setting their rates, lenders set their own interest rates based on a range of considerations. This is why interest rates can change even when the cash rate stays the same. For example, lenders might lower rates to attract more customers, or they may increase rates if they’re concerned about market risks. It’s also helpful to keep in mind that any rate-related decisions a bank makes take the needs of both deposit holders and home loan customers into account.

One way home loan customers can protect themselves against fluctuating interest rates is to choose a fixed rate loan. With fixed rates, your interest rate stays the same for a fixed period at the start of your loan term. You can generally choose fixed rate periods of between one and five years. Learn more about Suncorp Bank’s fixed rate and variable rate home loans and compare their rates and features.

Get expert guidance on all your home loan questions

Knowing how Reserve Bank decisions can affect your home loan interest rate can be illuminating, but good home loan advice is even more important. If you’re keen for a few pointers about what could be right for you, Suncorp Bank’s lending experts can help. All consultations are 100% obligation-free.

Talk to a home lending specialist

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Home Loans are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Please read the relevant Product Information Document, Lending Fees and Charges and Home Package Plus Terms and Conditions before making a decision regarding any Suncorp Bank products. Fees, charges, terms and conditions apply and are available on request or on our Product Information Documents and Forms page.

The information is intended to be of a general nature only and any advice has been prepared without taking into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.