The RBA Just Raised Rates Again. Here's What It Actually Means for Your Car Loan or Personal Loan.

You've seen the headlines. The Reserve Bank has lifted the cash rate for the third time this year, bringing it to 4.35%. That wipes out every cut from 2025 and puts rates back where they were at the peak of the last cycle. It sounds bad. But what does it actually mean for you, right now, if you've got a car loan or a personal loan?

The honest answer: it depends. And for a lot of people, it means less than they think.

What actually happened

The RBA lifted the cash rate by 0.25% on 5 May. That's the third hike in a row - February, March, and now May. The total increase this year is 0.75%.

The reason? Inflation picked up again in the second half of 2025, and a spike in fuel prices (up 24% over the year) has pushed the numbers higher than the RBA is comfortable with. Trimmed mean inflation, the measure the RBA watches most closely, is sitting at 3.3% - still above their 2-3% target band.

The cash rate is the rate the RBA charges banks to borrow money overnight. When it goes up, it pushes up the cost of borrowing across the economy. But how quickly that reaches your personal loan or car loan depends on what type of loan you have.

If you have a fixed-rate car loan, you're probably fine

Around 69% of car loans in Australia are fixed-rate. If yours is one of them, this rate hike doesn't change your repayments at all. Your rate was locked in when you signed. It stays the same until the loan ends.

That's the whole point of fixing your rate. You traded the chance of rates going down for protection against them going up. Right now, that looks like a good trade.

Check your loan contract or your last statement. If it says "fixed rate" or shows the same interest rate every month, you're not affected by this decision.

If you have a variable-rate loan, here's what changes

Variable-rate loans move when market rates move. But "move" doesn't always mean "move immediately" or "move by the same amount."

For home loans, the big banks passed through the full 0.25% within days. Personal loans and car loans are different. Lenders don't always adjust these rates in lockstep with the cash rate. Some will pass through part of the increase. Some won't move at all for months. It depends on the lender, how they fund their loans, and competitive pressure.

What the numbers look like

On a $30,000 variable car loan over 5 years at 7.50%, a 0.25% rate increase adds about $4 per month to your repayments. Over the remaining life of a 5-year loan, that's roughly $200 in extra interest.

If your lender has passed through all three 2026 hikes (0.75% total), you're looking at about $12 per month more than you were paying in January. That's roughly $700 over the life of the loan.

On a $15,000 variable personal loan over 5 years at 10%, a 0.25% increase adds about $2 per month. The full 0.75% cumulative increase is closer to $7 per month.

These aren't huge numbers on their own. But they add up if you're already tight on cash flow, and they come on top of higher fuel, groceries, and rent.

The thing about the cash rate and what you actually pay

The cash rate is not your interest rate. It's one input into it.

Banks fund their loans from deposits and wholesale markets. Non-bank lenders, the kind you'll often find through brokers, fund through warehouse facilities. These are large credit lines backed by pools of loans, and the interest rate on those facilities moves with bank bill swap rates, not directly with the RBA.

What this means in practice: when the RBA moves, different lenders respond at different speeds and by different amounts. Your lender might pass through 0.15% instead of the full 0.25%. Or they might not move at all if competition is keeping rates tight in the car loan market.

This is why comparing rates matters more than watching the RBA. Two lenders can respond to the same cash rate change in completely different ways.

Should you refinance?

Maybe. But it only makes sense if the maths works. Here's a simple framework:

1. Check your current rate. Log in to your lender's portal or call them. Ask what rate you're paying right now, not what you started on.

2. Check what's available. Car loan rates currently range from about 5.67% to 9.95% for borrowers with decent credit. If you're paying above 8.5% on a secured car loan, there may be room to move.

3. Check the exit costs. Fixed-rate loans may charge a break cost if you leave early. Some lenders charge nothing. Others calculate it based on the rate difference and remaining term. Ask for a formal payout figure in writing before you commit.

4. Do the maths. If refinancing saves you $30 a month but costs $500 in exit and establishment fees, it takes almost 17 months to break even. If you've only got 18 months left on your loan, it's probably not worth the paperwork.

5. Don't refinance just because rates moved. Refinancing makes the most sense when your credit position has improved since you first borrowed (better score, higher income, more equity in the asset) and there's a meaningful rate gap.

What to do right now

If you're not sure what type of loan you have: Check your contract or your latest statement. Look for the words "fixed" or "variable." If you can't tell, call your lender and ask.

If you have a variable loan and you're feeling the squeeze: Look at your last few statements. Has your rate actually changed? Not every lender passes through every hike. If it has changed, compare that rate against what's available in the market.

If you're about to apply for a car loan or personal loan: This is actually a reasonable time to lock in a fixed rate. Lenders are currently pricing fixed car loan rates below variable rates in many cases, which suggests the market expects rates to come back down. A fixed rate gives you certainty while the RBA figures out its next move.

If you want to check what's available: Request a comparison rate quote from a couple of lenders or a broker. A comparison rate includes most fees and charges, so it's a more honest number than the headline rate. You can do this without affecting your credit score if you ask for a quote rather than submitting a full application.

If you'd like to see what car loan or personal loan rates look like right now, Emu Money can compare options across 50+ lenders in a few minutes. No impact on your credit score.