A large majority of the 3.3 million mortgaged homeowners will not see their repayments increase should the Reserve Bank hike rates on Tuesday.<\/p>\n
Financial markets and most economists expect the RBA will lift its cash rate target from 3.6% to 3.85%, marking the shortest and shallowest rate rise cycle in memory after inflation roared back<\/a> in the second half of last year.<\/p>\n The central bank cut rates three times last year, but for most customers of three of the four major banks, lower variable rates did not automatically translate to lower home loan repayments.<\/p>\n National Australia Bank reports that eight in 10 of its variable mortgage borrowers did not reduce their payments through last year\u2019s three rate cuts, and at the Commonwealth Bank the share was between 85% and 90%.<\/p>\n ANZ has not reported how many of its customers contacted the bank to lower their repayments after each cut, but it\u2019s unlikely the share choosing to do so would be substantially different, said Sally Tindall, Canstar\u2019s data insights director.<\/p>\n \u201cLots of people are paying extra on their home loans, which means their direct debits haven\u2019t moved since January 2025,\u201d Tindall said.<\/p>\n \u201cWhat that will mean is they are in a great position to tackle a rate hike. Their monthly repayment won\u2019t increase unless they intervene.\u201d<\/p>\n Higher interest payments will still affect how quickly the home loan is paid off, she said, but \u201cit won\u2019t impact their day-to-day budget\u201d.<\/p>\n Sign up: AU Breaking News email<\/a><\/p>\n Westpac is the only big bank to automatically adjust a borrower\u2019s direct debit after a rate cut, if they have asked to pay the minimum.<\/p>\n Macquarie takes the same approach.<\/p>\n Jonathan Kearns, chief economist at Challenger and a former senior RBA official, said when rates moved there was too much focus on what central bankers call the \u201ccashflow channel\u201d, or the impact from changes in households\u2019 interest payments from a rate move.<\/p>\n \u201cIt\u2019s something that\u2019s very visible, but when we\u2019ve designed our financial system with mortgage offset accounts, that actually blunts that channel,\u201d Kearns said.<\/p>\n \u201cThat is good for homeowners in order to manage their cashflow and makes that aspect less impactful.\u201d<\/p>\n Kearns said there was research showing that the impact on a household\u2019s consumption from a rate move was similar whether the home loan was fixed or variable.<\/p>\n There were a range of other ways that the RBA\u2019s monetary policy decisions flowed through the economy: the \u201cwealth effect\u201d from rising or falling asset prices (especially home values), the impact on the exchange rate<\/a>, and the shifting of incentives for households and businesses to save or spend and invest.<\/p>\n \u201cThat spreads the impact of monetary policy changes more broadly across the economy,\u201d Kearns said.<\/p>\n