Australia · Worked example
What 25 basis points does to a variable home loan
Twenty-five basis points is 0.25 percentage points. It is the RBA’s usual step. Here is what one step does to an example loan if the lender passes it on in full. The loan is made up to keep the arithmetic visible. It is not a typical or average loan.
Example loan: $600,000 owing, 30 years left, principal and interest, variable rate.
Starting rate: 6.20%, the RBA’s average rate on outstanding owner-occupier variable home loans for August 2026 (Table F6), before the September and November 2026 rises.
The formula
Lenders use the standard amortisation formula. With P the amount owing, r the rate per repayment period, and n the number of repayments:
Repayment = P × r × (1 + r)n ÷ ((1 + r)n − 1)
Step by step, monthly
- Monthly rate at 6.20%: 6.20 ÷ 100 ÷ 12 = 0.005167.
- Number of repayments: 30 × 12 = 360.
- (1 + r)360 = 6.3931.
- Repayment = $600,000 × 0.005167 × 6.3931 ÷ 5.3931 = $3,674.81 a month.
- Now add 25 basis points. Monthly rate at 6.45%: 0.005375, and (1 + r)360 = 6.8883.
- Repayment = $600,000 × 0.005375 × 6.8883 ÷ 5.8883 = $3,772.70 a month.
- Difference: +$97.89 a month, or about $1,175 a year.
A quick check: the first month’s interest is $600,000 × 0.005167 = $3,100.00 at the old rate and $3,225.00 at the new one. That $125.00 gap is bigger than the repayment change because the balance, and with it the extra interest, shrinks as the loan is paid down. The formula spreads that over the whole term.
The same move, up or down
| Rate | Monthly | Fortnightly | Versus 6.20% |
|---|---|---|---|
| 5.95% (25 points lower) | $3,578 | $1,651 | −$97 a month |
| 6.20% (starting rate) | $3,675 | $1,695 | — |
| 6.45% (25 points higher) | $3,773 | $1,740 | +$98 a month |
Fortnightly repayments
The fortnightly column uses the same formula with 26 repayments a year (r = rate ÷ 100 ÷ 26, n = 780). On that basis a quarter-point rise adds about $45.16 a fortnight.
Some lenders instead set the fortnightly repayment at half the monthly figure. Because there are 26 fortnights in a year, not 24, that adds the equivalent of about one extra monthly repayment each year and pays the loan off sooner. Check which method your lender uses. The AUD repayment calculator shows both.
What this example leaves out
- Your lender decides how much of an RBA move to pass on, and when. Lenders often pass a rise on in full within a few weeks, but it is their call.
- Money in an offset account reduces the balance interest is charged on, which shrinks the change.
- Some lenders keep your repayment the same after a cut, so more goes to principal. Others lower it. Ask yours.
- Fees, lenders mortgage insurance, and interest-only periods are not included.
General information only, not financial advice. The loan above is an illustration, not a quote or a typical-results claim.
Sources: RBA Statistical Table F6, Housing Lending Rates (series FLRHOOVA), August 2026; RBA media release 2026-30, 3 November 2026. Repayments use standard amortisation.