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BLINDSIDED: RBA keeps rates on hold
Despite leaving the cash rate on hold, the average variable borrower could still save more than $12k over next 2 years by refinancing.
08 July 2025
Despite leaving the cash rate on hold, the average variable borrower could still save more than $12k over next 2 years by refinancing.
The Reserve Bank has shocked the nation by leaving official rates on hold at 3.85% today, but a cash rate cut is potentially still on the cards in 2025—and could come as soon as 12 August.
In its statement, the RBA Board said, “it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis”.
Borrowers should break the holding pattern themselves
Borrowers can take matters into their own hands by haggling or refinancing their loan to a lower rate lender. The average owner-occupier who hasn’t renegotiated their home loan since the start of the rate hikes in May 2022 is on a variable rate of 6.61%. Yet, the Canstar database shows there are 35 lenders offering at least one rate under 5.50%. If a borrower with a $600,000 debt and 25 years remaining refinanced from 6.61% to 5.50% they would be effectively securing a rate cut of 1.11 percentage points – that’s more than four standard RBA cuts. Their minimum monthly repayments would drop by $408 and over the next two years they could save over $12,000 even after $1,150 of switch costs are factored in.
This assumes there are still two more RBA cuts in that 2 year period and that the banks pass them on in full.
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| Potential savings from refinancing: $600k loan |
|||
|---|---|---|---|
| Rate | Monthly repayments | Cost next 2 years | |
| Do nothing | 6.61% | $4,093 | $72,720 |
| Refinance | 5.50% | $3,685 | $60,596 |
| Difference | -1.11% | -$408 | -$12,124 |
Source: Canstar. Notes: Assumes borrower is paying principal and interest with 25 years remaining starting on the RBA’s average variable owner-occupier rate, which was 2.86% at the start of the hikes. Calculations assume two further cash rate cuts in the second half of 2025 and that banks pass on the cuts in full. Does not factor in any additional repayments. Includes switch costs but not other fees.
The wait for further interest rate relief continues
Canstar’s data insights director, Sally Tindall says, “Today’s decision has landed with a thud in households across the country, hoping for relief in the form of a rate cut.”
“The Board has said Australia is making good progress in the fight against inflation, however, it clearly isn’t prepared to fire off a rate cut without the next round of quarterly inflation results in its back pocket. Holding until at least the next meeting gives the Board time to better assess the impact of the previous two cuts.
“Data out this week from CBA, which shows the majority of borrowers have reinvested the last couple of cuts into their mortgage, is a strong indication that rate cuts will take longer than expected to filter through the economy.
“Yes, it’s disappointing and entirely frustrating, but if you’ve got a variable mortgage, you don’t have to just sit back and cop it.
“Now is the time to get on the phone and start negotiating with your bank for your own personalised rate relief or consider taking that extra step by refinancing to a lower cost lender.
“If you need a figure to aim at – try this on for size. The average owner-occupier is on an estimated variable rate of 5.80 per cent, but there are 35 lenders on our database offering at least one variable rate under 5.50 per cent.
“Importantly, this decision today from the RBA doesn’t put a ruler through the possibility of further cash rate cuts, so if you can lock in a cut of your own today, and we get a cash rate cut further down the track, you’ve effectively secured yourself a double cut.”
Owner occupied
20% min deposit
Redraw facility
Owner occupied
10% min deposit
Redraw facility
Owner occupied
20% min deposit
Redraw facility
Owner occupied
20% min deposit
Redraw facility
Owner occupied
40% min deposit
Redraw facility
Owner occupied
40% min deposit
Redraw facility
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
