Quick answer
The RBA cash rate is the overnight rate banks charge each other, and it sets the base for most variable-rate lending. When the Reserve Bank lifts it, as it did by 25 basis points on 29 September 2026, variable business loans and lines of credit tend to follow, while fixed-term and short-term products reprice only when they are next written or renewed.
Key points
- The RBA raised the cash rate four times in 2026, most recently by 25 basis points on 29 September, and said further rises are possible
- Variable-rate facilities usually move within weeks; fixed-rate loans don't change until the fixed term ends
- Each 0.25 percentage point is roughly $750 a year in extra interest on a $300k variable balance, before any lender-specific change
- Short-term and cash-flow products are priced on risk and term, so the cash rate is only one input
- The biggest effect on many businesses is indirect: customers spend less and suppliers pass on costs
When the Reserve Bank moves the cash rate, the news arrives in every bulletin, and most owners ask the same practical question: what does this do to my repayments?
The honest answer is “it depends on the type of loan you hold”. A variable-rate overdraft, a fixed equipment loan and a six-month cash-flow facility respond very differently. This guide explains the mechanism, what the 2026 rises mean in dollars, and how to plan.
What did the RBA do in 2026?
By the Reserve Bank’s own statement, the Monetary Policy Board raised the cash rate target by 25 basis points on 29 September 2026, taking it to 4.60 per cent, with all nine members voting in favour. It was the fourth increase of the year. Reported earlier moves were in February, March and May, with the board holding in June and August.
The Board gave reasons that matter for planning. It said inflation was still too high, that energy prices were above what it expected in August, and that domestic capacity remained tight. It added that “a further tightening in financial conditions is warranted” and that it may raise the rate again if needed. It also noted that business investment and debt growth remain strong, which tells you that plenty of other owners are borrowing too.
You don’t need to forecast the next meeting. You need to know how much extra a further rise would cost you, and whether the business can absorb it.
How does the cash rate reach my loan?
A business lender’s price is built from several parts, and the cash rate is only one.
- Funding cost. Banks borrow from depositors and wholesale markets at rates that track the cash rate closely. Non-bank lenders borrow from warehouse funders and investors, whose costs also respond, usually with a lag.
- Margin. The lender’s cost of running the operation, plus profit.
- Risk. Your industry, trading history, security and credit position.
- Product structure. Term, repayment type, fees and whether the rate floats or is fixed.
When the cash rate rises, step one rises. For a variable product, the lender typically passes some or all of the change on. For a fixed product, nothing changes until the fixed term ends. For a deal that is priced at the time you sign, the change shows up only in the next quote.
That is why two borrowers with the same lender can feel a rise differently. One holds a variable line of credit and sees the repayments move. The other fixed 18 months ago and sees nothing yet.
Which business loans move most?
| Product | Typical response to a rise | What to check |
|---|---|---|
| Overdraft or line of credit | Variable, usually moves soon after | The lender’s notice and the date it applies |
| Variable term loan | Moves, and repayments are recalculated | Whether repayments or the term adjust |
| Fixed-rate term loan | No change until the fixed period ends | The expiry date and the rate you will be offered |
| Chattel mortgage or equipment loan | Often fixed at signing, so protected for the term | Any balloon due at the end |
| Short-term or cash-flow loan | Priced per deal, so changes show at renewal | Total cost in dollars, not a headline figure |
| Invoice finance | Fees may include a variable component | Whether the discount charge floats |
| Property-secured loan | Depends on product, often variable or fixed by term | LVR and the repayment type |
Our guide to fixed versus variable business loans goes through the trade-offs in detail, and the variable rate glossary entry sets out the vocabulary.
What does a 0.25 point rise cost in dollars?
Percentages hide the real effect, so convert them. A 0.25 percentage point increase adds roughly:
- $750 a year on a $300k variable balance
- $1,250 a year on a $500k balance
- $250 a year on a $100k balance
Those figures assume the lender passes the full change on and that you pay interest only, as an illustration. If the loan is principal and interest, the repayment effect is a bit different because the balance falls over time, and the loan’s remaining term matters. The four 2026 rises add up to 1 percentage point, which on a $300k variable balance is around $3,000 a year, or $250 a month. For many businesses that’s the cost of one extra staff shift a week. For a thin-margin business, it’s the difference between a good year and a flat one.
To test your own figures, use the business loan repayment calculator and run it at your current repayment and then at a higher one.
What are the indirect effects?
Direct repayments are the visible part. Owners often feel the indirect effects more.
- Customers spend less. The RBA’s statement describes consumer spending easing gradually and housing prices falling in most capital cities. Retailers, hospitality, trades linked to housing and discretionary services tend to notice first.
- Suppliers pass on costs. The Board noted that firms report cost pressures and are raising or planning to raise prices. If you buy stock or materials, expect it, and if you can’t pass it on, margin shrinks.
- Customers pay later. When money gets tighter, invoices stretch. Your own cash cycle can lengthen even if your loan doesn’t change.
- Lenders look harder at serviceability. A higher benchmark rate means a higher assessed repayment, so a business that qualified last year for a given amount may qualify for less. What lenders mean by serviceability explains the test.
Read our wider guides on how interest rate changes affect small business and how inflation affects business borrowing for those flow-on effects.
A worked example
An invented example. A Toowoomba landscaping supplier has a $400k variable property-secured loan, a $60k equipment loan fixed for five years, and a $50k line of credit. Annual revenue is $1.9m and net profit before interest and tax is $190k.
After the four 2026 rises, the variable loan and the line of credit, a combined $450k, cost about $4,500 a year more in interest than before the increases (1 percentage point on $450k). The equipment loan hasn’t changed. Net profit falls from $190k to about $185.5k before tax, which doesn’t threaten the business, but the cushion that was there for a slow quarter has shrunk.
The owner then asks two questions. If the RBA lifts once more at its next meeting, what’s the extra cost? About $1,125 a year on the same balances. And what if sales drop 10 per cent in the first half? Profit would be much more affected by that than by the rate. So the owner puts more effort into collecting debtors and negotiating supplier terms, and less into hunting for a lower rate.
The lesson is proportion. A rise in the cash rate matters, but your own trading usually matters more.
How should I plan around further rises?
- Stress-test at a higher cost. Run repayments at one full percentage point above today’s level. If the business still works, you’re resilient.
- List your loans by type. Know which are variable, which are fixed, and when each fixed term ends.
- Talk to your bank early. Banks are often the cheapest funding, and a bank that knows your trading may restructure or offer a fixed option before you’re under pressure. That conversation is worth having.
- Be wary of refinancing in a panic. Switching to a short-term product to save a few hundred dollars of interest can raise your total cost if you pay establishment fees and then need to refinance again.
- Hold a buffer. A cash buffer of a few weeks’ expenses does more for you than any rate decision. See how to manage business cash flow for a workable approach.
If a bank has declined you, or you need money fast, the comparison to make is total cost in dollars over the life of the loan, not the label on the product. Our guide on business loan costs and fees shows how to do it, and banks versus non-bank lenders explains how the two differ. You can also tell us what you need and we’ll point to the right type of finance without any obligation.
When rates are rising, the right funding matters more
Higher rates punish loose structure: a loan that’s too large, a term that’s too short, or a facility that doesn’t suit how your cash arrives. They reward a deal built around your actual cash flow.
Enquiring with us takes about a minute, and your credit file stays untouched while we look. Your details are not shared with a long list of lenders. A real person reads your situation and phones you, so the conversation starts from your numbers and not a script. The more accurately you fill in the form, the better the first suggestion will fit.
Frequently asked questions
What is the RBA cash rate?
It is the interest rate on overnight loans between banks, set by the Reserve Bank's Monetary Policy Board at its scheduled meetings. It is the benchmark that other interest rates in the economy are built around. It is not the rate you pay on your own business loan, which also includes the lender's funding costs, margin and your risk.
How quickly do lenders pass on a cash rate rise?
Banks usually pass changes on to variable-rate customers within a few weeks, and each lender announces its own date. Non-bank lenders vary. Some adjust variable products at a similar pace, and some price each loan individually at the time you borrow. Your loan contract or lender notice tells you when a change takes effect.
Does a cash rate rise affect my fixed-rate business loan?
Not during the fixed period. Your repayments stay where the contract set them until the fixed term ends, at which point the loan reprices at whatever the lender then offers. That makes the date your fixed term expires one to put in the calendar.
Will the RBA cut rates soon?
Nobody can say reliably. After its 29 September 2026 meeting the RBA said it would do what it considers necessary to return inflation sustainably to target, including raising the rate further if needed. Plan for the possibility of a higher cash rate for longer rather than counting on relief.
Do short-term business loans move with the cash rate?
Mostly not in a direct way. Short-term and cash-flow products are priced on the risk, term and security of each deal, and often quoted as a total cost in dollars. A cash rate rise can nudge the lender's own funding cost, but the price you see is shaped more by your turnover, trading history and security.
Should I fix my loan before another rise?
It depends on the loan and your cash flow. Fixing gives certainty, and it may cost more if rates later fall or if you need to exit early. If your business can't absorb a further increase, certainty is worth something. A bank or adviser who knows your numbers is the right person to run both scenarios.