RBA announces first cash rate cut since 2020 — What does it mean for your mortgage?

At last, some relief for Aussie borrowers. The Reserve Bank of Australia (RBA) has officially cut the cash rate by 25 basis points, bringing it down to 4.10%.

If you’re wondering how this might affect your mortgage repayments, or whether more rate cuts are on the horizon, let’s break it all down.

Why this rate cut matters

This is the first time the RBA has reduced the cash rate since November 2020, when rates were slashed to a record-low 0.10% as part of the emergency COVID-19 response.

Since then, interest rates have steadily climbed, with 13 consecutive rate hikes aimed at slowing down inflation.

Now, inflation is easing faster than expected. Recent data showed underlying inflation for the December quarter was sitting at 3.2%, which gave the RBA enough confidence to shift gears.

RBA Governor Michele Bullock explained the decision, saying:

“There has also been continued subdued growth in private demand and wage pressures have eased. These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range.”

What will this mean for your home loan repayments?

If you’re on a variable-rate mortgage, there’s a good chance your lender will pass this cut on by lowering your interest rate. This could reduce your repayments and give your household budget some much-needed breathing space.

To give you an idea of what that might look like, here are some quick calculations:

• $500,000 loan: repayments could drop by about $77 per month (that’s around $924 a year)
• $750,000 loan: repayments could decrease by about $115 per month, saving roughly $1380 per year
• $1 million loan: repayments could go down by about $154 per month, which adds up to $1848 per year

Of course, this assumes your lender passes on the full 25 basis point cut. After so many rate hikes, many borrowers will be watching closely to see if banks do the right thing. With a federal election not too far off, there will also be public and government pressure for banks to play fair.

Will your bank lower your repayments automatically?

Even if your lender reduces your interest rate, they may not automatically lower your actual repayment amount.

Some lenders leave repayments at the old, higher rate, which means more of your money goes towards paying off the loan’s principal, instead of interest.

That’s not a bad outcome if you want to get ahead on your mortgage. But if your household budget is tight and you need the extra cash flow, you can ask your lender to reduce your repayments to reflect the lower rate.

If you’re unsure how your lender handles these changes, we can help you check in a few days once lenders have had time to respond to the RBA’s announcement.

Will rates drop further in 2025?

There are seven more RBA meetings scheduled this year, so the question now is whether this cut is the first of many.

In its statement, the RBA didn’t give a clear indication of what’s to come, but the big banks have their own forecasts:

• NAB expects the cash rate to drop to 3.10% by February 2026, which would mean four more cuts
• CBA predicts the cash rate will fall to 3.35% by December 2025 (that’s three more cuts)
• Westpac also expects the rate to hit 3.35% by the end of 2025
• ANZ is more conservative, forecasting just one more cut, bringing the rate to 3.85% by August 2025

Still feeling the pressure? Let’s review your loan

This rate cut will bring some relief, but it’s no secret that many households are still struggling with rising living costs and higher-than-expected mortgage repayments.

If it’s been a while since your last home loan review, now is the perfect time to check whether you’re still on the best possible deal.

At Osinski Finance, we help homeowners like you explore all your home loan options — from renegotiating with your existing lender to refinancing with a better deal or even consolidating multiple debts into one manageable loan.

We also offer an interest rate tracker service, which keeps an eye on market changes and alerts you if better opportunities become available. That way, you’re always in the loop and never miss a chance to save.

Every household is different, so we’ll work with you to create a plan tailored to your needs.

Get in touch with us today, and let’s make sure your mortgage is working for you, not the other way around.

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