The US just raised interest rates. What it means for your Australian home loan... and what it does not

If you woke up to headlines saying US interest rates have gone up, the natural next question is whether yours are about to follow. It is a fair question, and the honest answer is... not directly. But it is not nothing either, and the difference is worth a few minutes of your time.

01What the Fed actually decided

On 16 September, US time, the Federal Reserve's Open Market Committee raised the target range for the US federal funds rate by a quarter of a percentage point, to 3.75% to 4.00%. The vote was unanimous, 12 to 0. The committee's statement said inflation "remains elevated" and that the move would "support a timelier return" to its 2% goal.

It did not come out of nowhere. At its July meeting the Fed held its rate, but three members voted against that decision because they preferred a rise. By September, all twelve voted for one.

02Why US rates do not set yours

Australia has its own central bank with its own job. The Reserve Bank's Monetary Policy Board sets the cash rate target for Australia, based on what is happening to Australian inflation and Australian jobs. It does not follow the Fed up or down on a schedule.

Then your lender sets your actual home loan rate. The cash rate is a strong influence on that, but the RBA itself describes it as "not the only determinant"... conditions in financial markets, competition between lenders, and the risk of different types of loans all play a part. That is why lenders sometimes move when the RBA has not.

03How it can still reach you

There are three real channels. None of them is a straight line, and none of them is automatic.

1. The Australian dollar

When US interest rates rise relative to Australian rates, the Australian dollar can come under downward pressure, all else being equal. A weaker dollar makes imported goods cost more in Australian dollars, which adds to inflation... and inflation is exactly what the RBA is focused on right now.

This is not theoretical. In its August 2026 Statement on Monetary Policy, the RBA said the Australian dollar had eased since May partly because rising bond yields overseas, particularly in the United States, had narrowed the gap between Australian interest rates and those elsewhere. Lower commodity prices and changed expectations for the RBA's own path played a part too.

2. Bond markets and fixed rates

Fixed home loan rates are priced off longer-term market rates, not the cash rate on the day. The RBA noted earlier this year that new fixed rates had risen because of higher longer-term reference rates alongside rising market expectations for the cash rate. Global bond markets can influence those longer-term rates, so this is the channel where a US move is most likely to show up first.

But the link is looser than the headlines suggest. Between the RBA's May and August statements, US government bond yields rose by around 0.20% while Australian yields ended slightly lower. Same period, opposite direction. A US rise does not automatically mean higher fixed rates here.

It also helps to keep this channel in proportion. According to the RBA, fewer than 5% of new and outstanding Australian mortgages were on fixed rates as at early 2026. For most borrowers, the RBA's own decision matters far more than what global bond markets do.

3. What it costs lenders to borrow

Lenders need money to lend. For the major banks, the RBA puts funding at around two-thirds deposits and almost one-third debt, with some of that debt raised overseas.

Here is the part that surprises people. Banks generally swap the payments on that offshore debt back into Australian dollars, at Australian short-term interest rates. So the Fed's decision does not flow straight into what your lender pays for its money. Global conditions can still change the margin investors ask for when lending to banks, but the RBA described wholesale conditions as generally favourable for bank borrowing through 2025 and into 2026.

04What the banks expect next

You may have heard that everyone now expects Australian rates to rise. That is closer to true than it was a few months ago, but it skips the part that matters most if you are planning around it... the forecasters do not agree on when.

Financial markets lean earlier than most of the banks. ASX 30 Day Interbank Cash Rate Futures implied a 78% expectation of a rise to 4.60% at the 29 September meeting, as at the close on 15 September... before the Fed announced its decision. That number moves every trading day.

One detail is worth knowing. The August monthly inflation figures are not released until 30 September, the day after the RBA decides. The most recent figures, for July, showed headline inflation at 3.5% and trimmed mean inflation at 3.6% over the year... both above the RBA's 2 to 3% target band.

So the fair summary is this. All four major banks now expect the next move to be up, but only one expects it this month. The RBA said in August it would consider "increasing the cash rate target further if upside risks materialise". Nobody knows the outcome until 2:30pm on 29 September, and I am not going to pretend otherwise.

05Why I do not plan on forecasts

My view, for what it is worth: bank forecasts are worth reading and not worth planning around.

Look at one bank's published calls this year. I am using Westpac because its economics team published every change along with its reasoning, which is exactly what good forecasters should do. This is not a criticism of Westpac. It is a picture of how quickly the ground moves.

What actually happened: the RBA raised in May, then held in June and August. Four different calls in under six months, from a team whose whole job is this. And Westpac was not alone... ANZ, NAB and CBA all changed their calls within days of the July inflation figures in late August.

So I do not pick a forecast and build a loan around it. I ask a different question... would this loan still work if the forecast is wrong? If a 0.25% rise, or a 0.50% one, would break your budget, that is the thing to fix, whichever bank turns out to be right.

06What I would and would not do

What I would not do

• ●Rush to fix because of a US headline. Fixed rates generally already reflect where markets expect rates to go, so fixing today locks in that pricing, not yesterday's. It can also mean giving up some offset or extra-repayment flexibility. Fixing can suit some people, but that is a decision about your cash flow and plans, not about the Fed.
• ●Assume your repayments change tomorrow. The Fed does not change your variable rate. If your rate moves, it will be because the RBA moved, or your lender did.
• ●Plan around a single forecast. Four major bank economics teams, two different timings. That disagreement is the honest picture.

What I would do

• ●Know your number after a 0.25% rise. Put your loan into my mortgage repayment calculator, note the repayment, then add 0.25% to your rate and compare. It is an estimate only, but it turns a headline into a dollar figure for your own loan.
• ●Check your cash-flow room. If a quarter of a per cent would make things tight, that is worth knowing now, while there is time to plan, rather than when your lender's letter arrives.
• ●Look at the rate you are actually paying. Lenders reprice on their own timetable and often price new customers differently to existing ones. Whatever the RBA does on 29 September, how your rate compares is something you can check today... that is what a loan review is for.
• ●If you are buying, do not wait out the forecasts without running the numbers. Lenders assess what you can borrow with a buffer on top of the loan rate, so a rate rise can reduce the amount they will lend. There is a real example of this just below, and the Borrowing Power Framework explains what moves that number.

What this looked like for one client

A client came to me recently thinking about delaying their pre-approval. They are an investor actively growing their portfolio, working with a buyer's agent, and looking at a new build in Queensland. With rate rises being forecast, holding off to see what the RBA did felt like the careful move.

I explained what waiting could cost them. Because lenders assess borrowing capacity with a buffer on top of the loan rate, each rise flows straight into that assessment. On their numbers, two rises in a row could have reduced what they could borrow by up to $100,000.

But borrowing capacity was only half the conversation. Before going any further, we went through their repayments at a higher rate, and they confirmed they were comfortable carrying them. That part matters more to me than the approval figure... a bigger pre-approval is not a good outcome if the repayments would hurt.

They went ahead, and their pre-approval was assessed at current rates, before the forecast rises. Part of their reasoning for a new build was how the 2026 Budget changes treat new builds differently to established property... that side is a question for an accountant, and I cover the changes in my budget post.

If you want to see what a rise in September or November would mean for your loan specifically, book a call and I will run your numbers with you. For the cash rate itself, my RBA cash rate tracker is updated on the day of every decision.

Sources

• ●Federal Reserve... Federal Reserve issues FOMC statement (16 September 2026) ... the decision, target range and 12 to 0 vote. July 2026 statement: 29 July 2026.
• ●Reserve Bank of Australia... Cash rate target, Monetary Policy Decision, 11 August 2026 and the 2026 meeting schedule.
• ●Reserve Bank of Australia... Statement on Monetary Policy, August 2026: Financial Conditions ... the Australian dollar, yield differentials and US versus Australian bond yields.
• ●Reserve Bank of Australia... Statement on Monetary Policy, February 2026: Financial Conditions ... fixed-rate pricing and the share of fixed-rate mortgages.
• ●Reserve Bank of Australia... Developments in Banks' Funding Costs and Lending Rates (Bulletin, May 2026) and The Transmission of Monetary Policy.
• ●NAB... RBA Watch: NAB now expects the RBA to hike in September (27 August 2026).
• ●CommBank... Australian economy: the cyclical slowdown has arrived (10 September 2026).
• ●Westpac IQ... Cliff Notes (11 September 2026).
• ●ANZ's November call as reported by Capital Brief (1 September 2026).
• ●ASX... RBA Rate Tracker ... market expectation as at the 15 September 2026 settlement.
• ●Australian Bureau of Statistics... Consumer Price Index, Australia, July 2026.