What actually moves the interest rate on your loan?

The cash rate is the starting point

The Reserve Bank of Australia (RBA) sets the cash rate target, which influences what banks pay to borrow money. The RBA adjusts it mainly to keep inflation within its target range, while supporting employment. When the cash rate moves, lenders' funding costs tend to follow, and that can flow through to the rates they offer.

Global events feed into the picture

Things happening overseas, such as tariffs and trade disputes, changes in major economies, or shifts in the Australian dollar, can affect prices, growth and the inflation outlook here. The RBA considers these conditions when it makes decisions, which is why global news can move expectations about Australian rates.

Your lender adds its own pricing

The cash rate is only one input. Each lender sets its own rates based on its funding costs, competition, appetite for different types of lending, and the risk of each loan. That's why rates differ between lenders, and why two people can be offered different rates by the same lender. Your credit history, the asset, the loan term and any deposit all play a part.

Fixed or variable: why it matters

Most car and equipment loans have a fixed rate for the whole term. If you already have one, a change in the cash rate won't change your repayments. It mostly affects the rates offered on new loans. Variable-rate loans, which are more common for some personal loans, overdrafts and lines of credit, can move up or down during the loan.

What this means when you're borrowing

Rather than trying to time the market, focus on what you can control:

• Borrow an amount with repayments you can comfortably afford, even if costs rise elsewhere
• Compare the total cost across lenders, not just the headline rate
• Understand whether your rate is fixed or variable
• Strengthen your application with a good credit history and, where possible, a deposit

General information only

This article is general information only. It does not take your personal circumstances into account and is not personal credit, legal, tax or financial advice. It is not a forecast of interest rates. All finance is subject to lender assessment and approval, and rates depend on the lender and your circumstances.

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