At the August board meeting the Reserve Bank of Australia (RBA) dropped the official cash rate by 0.25% to 3.60%, providing welcome relief for home loan customers.
The 3rd rate cut in 2025.
The Reserve Bank of Australia (RBA) has lowered interest rates by 25 basis points to bring the cash rate down to 3.60 per cent.
The rate drop marks the third cut in the current easing cycle (which began in February of this year) and the lowest the cash rate has been since May 2023.
In an unattributed record of votes, the RBA revealed that the move was made by nine members in favour versus zero against.
What did the RBA board statement say?
In the post-meeting statement by the RBA, the board highlighted progress made on easing inflation as a contributory factor for cutting rates.
“With underlying inflation continuing to decline back towards the midpoint of the 2–3 per cent range and labour market conditions easing slightly, as expected, the board judged that a further easing of monetary policy was appropriate. This takes the decline in the cash rate since the beginning of the year to 75 basis points.
“The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply. It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.”
It said it would be “attentive to the data and the evolving assessment of risks to guide its decisions and “pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market”.
“The board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome,” it added.
What does this mean for you?
For a home buyer earning $120,000 a year, the 2025 rate drops could see their borrowing capacity increased by around $42,000 compared to the start of the year.
For someone with a mortgage around $500,000, the 2025 rate cuts represent a monthly interest saving of around $315, or $3,750 per year.
These numbers sound great, but industry studies show that most Australians are still overpaying on their mortgage.
It’s always a good idea to keep your loan repayments the same after a rate cut, if you’re able. But with a lower rate, you can potentially pay your loan off sooner.
Remember, lenders are not obliged to pass on any RBA official rate cut. Now is a good time to check your mortgage, especially in the coming weeks. If you’re unsure on what is a good rate for you, check with a lending specialist who can do research for you – at no cost.
If you’re looking to buy, time will tell if a rate cut pushes up property prices. Once again, keep close to professionals, and if you think the market is moving, you may want to speed up your property research.
If you’re keen to switch and save, or just have a free home loan review, get in touch with one of our local specialists today. We can also offer free property market info to help with your research.
Understanding your options can start with a simple phone, web, or in person discussion.
We know loans like we know homes.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.