Understanding Australian Mortgage Rates: Cash Rate, Variable, Fixed and Comparison Rates

Your home loan rate is not the RBA cash rate, and the cash rate is not a promise about next month's repayment. This guide explains the structure - policy rate, customer variable and fixed pricing, comparison rates, and when to fix versus stay variable - without locking the article to a single "current rate" snapshot. Rates change; the relationships below do not.

For repayments, use the loan repayment calculator. For switching, use the refinance calculator.

The 30-second summary

• The RBA cash rate is the policy benchmark; your variable rate is cash rate plus the lender's margin (and risk pricing).
• Fixed rates are priced off wholesale funding expectations for a set term - they do not auto-track cash-rate moves during the fix.
• Always compare the interest rate and the comparison rate, then check features (offset, extras, fees).
• LVR, owner-occupier vs investor, and P&I vs interest-only move you between pricing tiers.
• Fix for certainty; stay variable for flexibility (offset, extras, easier exit).
• Confirm live rates with lenders or a broker; treat any published "today's rate" as perishable.

Cash rate vs the rate on your loan

Your variable rate ≈ RBA cash rate + lender margin + risk/product loadings

When the Reserve Bank changes the cash rate, most variable loans move in the same direction over the following days or weeks. The pass-through is not always one-for-one, and some lenders move faster than others. Fixed-rate customers keep their contracted rate until the fixed period ends, then usually roll to a variable reversion rate unless they refinance or re-fix.

For official cash-rate decisions and history, use the Reserve Bank of Australia directly rather than a blog snapshot.

Variable, fixed and split

Type	What you get	Trade-off
Variable	Rate can rise or fall; usually full offset and flexible extras	Repayment uncertainty
Fixed (1-5 years typical)	Known repayment for the fixed term	Limited offset/extras; break costs if you leave early
Split	Part fixed, part variable	Complexity; still need a clear goal for each portion

A split loan is a hedge, not a free lunch. Price both legs and decide what share of the balance needs certainty.

Comparison rates

Australian lenders must publish a comparison rate that folds the interest rate and many fees into one figure for a standard loan assumption. Use it to spot a cheap headline rate with expensive fees. Then still read the product features: a slightly higher comparison rate with a true 100% offset can beat a "cheaper" basic loan if you keep a large cash buffer.

What moves your rate

1. LVR - lower loan-to-value usually means sharper pricing; above 80% often means LMI on a new loan.
2. Purpose - owner-occupier P&I is typically cheaper than investment or interest-only.
3. Loan size and package - discounts may come with annual package fees.
4. Credit and income - stronger serviceability and cleaner credit support better offers.
5. Competition and funding costs - unrelated to your household, but they shift the whole market.

Fix vs variable - a practical frame

Choose fixed when a known repayment for the next few years matters more than optionality, and you are unlikely to sell or refinance mid-fix. Choose variable when you want offset, unlimited extras, or the option to refinance without a large break cost. Stress both paths in the loan repayment calculator at a rate 1% higher than today's offer so the budget survives a rise.

If you are already on a loan and market pricing has moved, the refinance calculator and refinancing guide cover break-even and switching costs. For how daily interest is actually calculated, see how to calculate home loan interest.

FAQ

What is the RBA cash rate and how does it affect my mortgage?

The cash rate is the Reserve Bank of Australia's overnight policy rate. Variable home loan rates usually move with it over time, but lenders set their own margins. A cash-rate cut does not guarantee a matching cut on your loan, and fixed-rate loans do not reprice until the fixed term ends.

What is a comparison rate?

A comparison rate blends the interest rate with many fees into a single percentage so products are easier to compare. It is a useful screen, not the whole story - features like offset availability still matter, and assumptions behind the comparison rate may not match your loan size or term.

When does fixing make sense?

Fixing suits borrowers who need repayment certainty for 1-5 years and can live with limits on extras, offset and early exit. Break costs can be large if you refinance or sell during the fixed period. Variable usually keeps more product flexibility.

Why is my rate higher than the advertised special?

Advertised rates assume a borrower profile (often owner-occupier, P&I, lower LVR). Investment loans, interest-only periods, higher LVR and thinner credit files attract higher pricing. Package discounts and annual fees also change the effective cost.

Does a lower LVR always mean a better rate?

Usually yes within a lender's pricing grid. Crossing below 80% LVR often opens sharper rates and can remove LMI on a new loan. Equity gains and principal paid down are the two levers that improve LVR.

Should I watch the cash rate or my lender's variable rate?

Watch both. The cash rate sets the broad direction; your lender's discretionary margin decides what you actually pay. Re-price or refinance when your rate drifts above competitive offers - use the refinance calculator to test break-even.

Next step

Model repayments at your rate and a stressed rate in the loan repayment calculator. If switching lenders looks attractive, run costs through the refinance calculator.

This article provides general information and does not constitute personal financial advice. Live rates and product rules change - confirm with lenders, ASIC Moneysmart resources, or a licensed broker.