A home loan rate rise is on its way for many Australian mortgage holders. On 29 September 2026 the Reserve Bank lifted the cash rate target by 25 basis points to 4.60%, effective 30 September, and lenders have started deciding how much of that increase to pass on to variable home loans. If you have a mortgage and are thinking about a car loan, the higher home loan repayment matters twice: it comes out of your budget, and it is one of the first commitments a car finance lender looks at when it tests your borrowing power.
This article explains what has been announced so far, how a mortgage increase flows into a car loan application, and what to check before you apply. It is general information, not advice about your own finances.
What lenders have announced so far
The Reserve Bank's decision statement says the Board raised the cash rate because inflation remains elevated and some of the upside risks it flagged in August are materialising, including higher global energy prices. It follows three earlier increases this year, so the cash rate is now 100 basis points higher than at the start of 2026. The Board said it will continue to do what it considers necessary, including increasing the cash rate further if needed. Its next scheduled decision is at 2.30pm on 3 November 2026.
Lenders set their own home loan rates, and announcements arrive at different times. As at the morning of 30 September 2026:
- Macquarie Bank said it will increase its variable home loan reference rates by 0.25% p.a., effective from 15 October 2026.
- ANZ said on its rate changes page that it is reviewing its home loan and residential investment loan rates and will post any update there.
- Westpac said on its interest rate news page that its rates are under review and that it will announce any change to its variable home loan rates on that page.
Other lenders will publish their own decisions, often with an effective date a week or more after the announcement. The only figure that applies to you is the one in your own lender's notice.
Why a home loan rate rise reaches your car loan application
A car loan lender does not look at the cash rate when it assesses you. It looks at your income, your living expenses and your existing debts, then works out whether the new repayment fits in what is left. This is the serviceability test, and for most mortgage holders the home loan repayment is the largest existing commitment in it.
When a variable home loan rate rises, the monthly repayment usually rises with it. That extra amount comes straight out of the surplus a lender uses to decide how much you can borrow. Nothing about your car, your income or your credit history needs to change for your car loan borrowing power to fall a little.
Lenders read your bank statements and credit report to confirm the repayment you actually make. Car and personal loan lenders set their own policies on how they count an existing home loan, so it is worth asking which figure a lender uses. Our guide to what lenders check in your bank statements covers what they look for.
How much a 0.25 percentage point rise can add
Here is an illustration only. The rates below are round numbers chosen to show the effect, not any lender's actual rate.
- Loan: $500,000 owing on a principal and interest home loan with 25 years left.
- At 6.00%: the monthly repayment is about $3,222.
- At 6.25%: the monthly repayment is about $3,298.
- Difference: about $77 more a month, or roughly $922 a year.
For comparison, a $30,000 car loan over five years at an illustrative 9% works out at about $623 a month. A mortgage increase of $77 a month is about an eighth of that repayment. On its own it rarely decides an application, but it adds to whatever else has changed in your budget this year.
Your lender may handle the change differently. Some variable loans recalculate the repayment automatically; with others, you may already be paying more than the minimum. Check your lender's notice for the new rate, the new repayment and the date it starts.
The serviceability buffer and home loan applications
If you are also refinancing your home loan or applying for a new one, there is a second layer. The Australian Prudential Regulation Authority expects banks to assess new home loans at an interest rate at least 3 percentage points above the loan's actual rate. APRA confirmed on 28 May 2026 that this mortgage serviceability buffer remains at 3 percentage points.
That buffer means a 0.25 point rate rise also lifts the rate a bank tests a new home loan at by the same amount. On the $500,000 illustration above, a test rate moving from 9.00% to 9.25% adds about $86 a month to the assessed repayment. The buffer is a home lending setting for banks, not a car loan rule, but it matters if a mortgage application and a car purchase are happening in the same period.
Should you use your home loan to pay for the car?
Some borrowers consider redraw, an offset account or a home loan top-up instead of a separate car loan, because home loan rates are usually lower. With variable home loan rates rising, the trade-offs are worth reviewing again. A car paid for over a 25-year mortgage term can cost more in total interest than a shorter car loan, even at a lower rate, and drawing down an offset balance increases the interest charged on the home loan. We explain the trade-offs in our guide to using your mortgage to buy a car.
What to do before you apply for a car loan
A rate rise is not a reason to rush a purchase, and it is not a reason to give up on one. It is a reason to base your numbers on current figures.
- Wait for your lender's notice, or check its rate page, and note the new home loan repayment and its start date.
- Rebuild your budget with the higher repayment, including less frequent costs like registration, insurance and servicing.
- Estimate a car repayment with our car loan repayment calculator, using a quoted car loan rate rather than the cash rate.
- Compare offers on the full cost. Our car loan rates guide explains interest and comparison rates, and the lender directory shows who lends for what.
- Check any existing car loan. A fixed rate car loan does not change because the RBA moved. If you are on a variable rate, look for a notice, and see our car loan refinancing information before you compare a switch.
If the higher mortgage repayment is already hard to manage, contact your lender early. Our guide to car loan hardship help explains the options available when repayments become difficult.
What to watch next
The next RBA decision is due on 3 November 2026. Between now and then, the useful signals are your own lender's rate notice and your updated budget, not market predictions. For more on yesterday's decision itself, read our RBA rate rise explainer. For how the earlier hold affected borrowers, see our piece on mortgage rates and car loan borrowing power.
Sources: Reserve Bank of Australia statement by the Monetary Policy Board and cash rate target overview (29 and 30 September 2026); Macquarie Bank media release (29 September 2026); ANZ home loan interest rate changes page and Westpac interest rate news page (checked 30 September 2026); APRA media release (28 May 2026).
