Here’s How Your Offset Can Fight Back

After a long break, interest rates are on the move again. The Reserve Bank of Australia (RBA) has lifted the official cash rate by 0.25% to 3.85%, marking the first increase in more than two years.

The reason? Inflation is still running higher than the RBA would like, and this rate rise is aimed at easing price pressures across the economy.

For borrowers, the big question is simple: how do I make my money work harder right now?

What does the latest RBA decision means for borrowers

The RBA’s job is to keep inflation within its target range of 2 - 3%. When prices rise too quickly, interest rates are often increased to slow spending and borrowing.

Looking ahead, there’s no clear consensus on what happens next. Some economists expect rates to hold steady throughout the rest of 2026, while others believe there could be one or two smaller increases later this year if inflation doesn’t cool.

For borrowers, this usually means:

• Lenders being a bit more cautious
• Smaller discounts on variable rates
• Fixed rates staying higher than we saw in 2025

In the property market, higher rates can take some heat out of buyer demand, particularly for those stretching their borrowing capacity. Price growth may slow or flatten in many areas, although suburbs with limited supply or strong local demand may continue to hold up well.

If you’re on a variable rate, this increase is likely to flow through to your repayments. As a rough guide, a $600,000 loan could increase by around $100 per month if lenders pass on the full rise.

That’s where your offset account can really earn its keep.

Using your offset to soften the impact of higher rates.

When interest rates rise, you pay more interest because it’s calculated on your loan balance. An offset account reduces that balance and interest charged without locking your money away.

Here’s how it works:
If your home loan is $600,000 and you have $40,000 in your offset account, interest is only charged on $560,000. Your loan balance doesn’t change, but the interest calculation does.

As rates go up, every dollar in your offset becomes even more valuable. Higher rates mean higher interest savings, which helps reduce the impact of rising repayments. In simple terms, the more money you keep in your offset, the less interest you’ll pay, even when rates increase.

Another big plus is flexibility. Unlike extra repayments, money in an offset account is still your money. You can access it for everyday expenses, emergencies, or future plans, while it quietly works away in the background to cut your interest bill.

Do you like to keep your savings in separate, easy to manage accounts? No problem!

Many lenders allow you to link multiple offset accounts to the same home loan, and they all work together to reduce the interest you pay.

The result? Same interest savings, better organisation.

It’s a simple way to keep your finances tidy while still making every dollar work harder on your home loan.

An offset account won’t stop rate rises but used well, it can make them far easier to manage and save you thousands in interest over the life of your loan.

Need Help? Let’s Talk

If you’d like to discuss what this change means for your loan, or what offset options are available to you, reach out to our Finance team. We’re here to help you navigate through this changing environment with confidence and security for your future.