Mortgage rates have not moved since May, when the Reserve Bank of Australia last lifted the cash rate to 4.35 per cent, and that steady setting is shaping what households pay on their home loans and, indirectly, how much they can borrow for a car. For anyone weighing up car finance while carrying a mortgage, the current picture matters more than the headlines suggest.
Where mortgage rates sit in September 2026
After a run of increases early in the year, the RBA has settled into a holding pattern. The cash rate rose on 4 February 2026 to 3.85 per cent, again on 18 March to 4.10 per cent, and once more on 6 May to 4.35 per cent. Since then the board has held steady at both its June and August meetings. The next scheduled decision is 29 September 2026.
Lenders passed those earlier rises straight through to home loans. The Australian Bureau of Statistics reported that mortgage interest charges for employee households rose 8.2 per cent in the June 2026 quarter alone, as banks applied the February, March and May increases to fixed and variable loans. In plain terms, mortgage rates are high and holding rather than falling, and the repayments many households locked in a year ago have climbed.
Why your mortgage affects your car loan
Car loans and home loans are separate products, but they draw on the same household budget. When you apply for car finance, a lender works out your surplus income, the money left after your regular commitments and living costs. A larger mortgage repayment shrinks that surplus, and a smaller surplus means a lower borrowing limit for the car.
Most lenders go a step further. They apply a serviceability buffer, assessing your existing home loan at a rate higher than you actually pay, to check you could still cope if rates rose again. With the cash rate already at 4.35 per cent, that buffered figure sits well above where mortgages were priced two years ago. The result is that a mortgage holder today is often assessed on a heavier notional repayment than the cash figure on their statement.
What steady but high rates mean for borrowing power
A held cash rate is a double edged outcome. On one hand, your mortgage repayment is not climbing further for now, so your budget is more predictable than it was during the early 2026 rises. On the other, rates are not easing either, so the borrowing power squeeze from the past 18 months has not unwound.
For a typical applicant, that means the amount a lender will advance for a car may be lower than it would have been before the rate rises, even if your income has grown. It also means the gap between your headline salary and your usable surplus is wider, because more of each pay cycle goes to the mortgage. You can see how repayment size changes the sum using the loan repayment calculators before you apply.
To put that mechanism in context, when more of your pay is committed to a mortgage that a lender has reassessed at a buffered rate, the pool of income they can lend against for a car is smaller, even when your gross salary has not changed. That is why some applicants find their approved amount has drifted lower over the past year despite steady employment. Building the same buffer into your own numbers before you apply avoids an unwelcome surprise at assessment time.
Fixed, variable and what a hold changes
If your home loan is variable, a held cash rate means your repayment should stay put until the RBA moves again. If you fixed during the low rate period and your fixed term is ending, you may be rolling onto a materially higher revert rate, which is worth modelling before you commit to a new car repayment on top.
For the car loan itself, the choice between a fixed and variable structure is a separate decision. Car loan pricing does not track the cash rate as tightly as mortgages do, a point we cover in more detail in our explainer on why car loan rates do not follow the cash rate. Comparing the current car loan rates on offer is a better guide to what you will actually pay than the cash rate alone.
Practical steps before you apply
Given rates are holding rather than falling, a few moves can protect your borrowing power. Clearing or reducing other debts, such as credit cards and buy now pay later balances, lifts your assessable surplus. Trimming discretionary spending in the months before you apply gives a cleaner picture of your budget. If your mortgage is with a lender offering a redraw or offset, understanding how those features interact with a new loan is useful too.
It is also worth checking whether refinancing an existing car loan could free up monthly cash flow before you take on more. Our refinancing guide walks through when that makes sense. And because lenders price the same borrower differently, comparing offers across the panel of lenders can widen the gap between an approval and a decline.
The 29 September decision and what to watch
The RBA meets again on 29 September 2026. Markets and economists will be reading the latest inflation and labour figures closely, but the board has given no signal of an imminent cut, and inflation pressures that built through late 2025 have not fully faded. For car buyers, the sensible planning assumption is that mortgage rates stay around current levels in the near term rather than dropping sharply.
That does not mean waiting. It means applying with a realistic figure, one that reflects your buffered mortgage repayment and your true living costs, so the loan you are approved for is one you can comfortably carry whether or not the RBA moves later in the year.
