Why Banks Do Not Always Pass On the Full Rate Move
ADS Team
Author
August 15, 2026
26 days ago
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In short: Lenders set their own rates and are under no obligation to match a cash rate move. Only part of their funding reprices with the cash rate, so a 0.25 point change does not produce a 0.25 point change in their cost of funds - and competitive positioning, margin targets and deposit pricing do the rest.
Key takeaways
- Only a portion of bank funding reprices directly with the cash rate.
- Timing differs too - announcements typically take effect two to four weeks later.
- Rises are often passed on faster and more fully than cuts.
- Repricing your own loan is the lever you control.
The three reasons
- Funding mix. Deposits and existing wholesale debt do not reprice on the day the RBA moves.
- Margin management. Lenders balance loan and deposit pricing to protect net interest margin, which is scrutinised by shareholders every half.
- Competition. Where a lender wants to grow market share it may pass on more; where it is protecting margin, less.
Timing matters as much as size
Announcements commonly take effect two to four weeks after the RBA decision. On a $600,000 loan, a 0.25 point rise delayed three weeks is roughly $80 you do not pay - and a cut delayed three weeks is roughly $80 you do not save.
Check the effective date in the announcement, not just the headline.
What you can actually do
- Compare your rate against new-customer pricing at your own lender after every move.
- Call and ask for a reprice. No serviceability assessment, no fee, and retention teams have discretion.
- Be prepared to move. A discharge form request is the most persuasive negotiating tool there is.
- Keep repayments unchanged after a cut - it builds a buffer for the next rise.
Frequently asked questions
Is partial pass-through legal?
Yes. Lenders set their own rates; the cash rate is a policy target, not a mandated retail rate.
Which lenders pass on the most?
It varies by cycle and by lender strategy. Comparison sites and RBA statistics track average outcomes, but your own rate versus the lender's new-customer rate is the number that matters.
Should I switch every time my lender lags?
Not automatically - switching costs $600-$1,500 and requires passing a buffered assessment. Ask for a reprice first; switch if they will not move.
Related reading
- Where Banks Actually Get the Money They Lend You
- Refinancing Your Home Loan: The Complete 2026 Process
- How the RBA Actually Sets the Cash Rate: The Reaction Function
Sources
- Cash rate and lending rates — Reserve Bank of Australia
- Home Loan Price Inquiry final report — ACCC
Rates checked as at 2 September 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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