RBA to hold, but borrowers should not
30 Sept 2025
The RBA is expected to keep the cash rate on hold at 3.60% today, at the end of its third-last meeting for 2025.
A September rate cut was always an outside chance, considering the RBA’s preference for a gradual easing cycle. However, since the last Board meeting in August, no urgent need for another cut has arisen.
Key factors shaping the decision today include:
- Last Wednesday’s higher-than-expected monthly ABS CPI Indicator.
- A steady unemployment rate, at 4.2%, despite a drop in the number of people employed (seasonally adjusted data).
- An uptick in the economy, with the latest National Accounts data showing the economy grew 0.6 per cent in June quarter.
Holding steady this month buys the Board more time to better assess the impact of the three cash rate cuts delivered so far. It also means the Board will have the next round of quarterly CPI results—due out on 29 October—ahead of the cash rate meeting in November.
Rate relief now saving households hundreds—but much of it is going back into mortgages
The three cash rate cuts in February, May and August are now starting to tally up in borrowers’ bank accounts.
Our analysis shows an owner-occupier with a $600,000 mortgage at the start of the cuts has seen their minimum monthly repayments drop by an estimated $272 this year.
For someone with a $1 million mortgage, the relief is around $453 per month.
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| Impact of RBA rate cuts on minimum monthly repayments | |||
|---|---|---|---|
| Loan size at start of cuts (Feb) | Min repayments (Feb) | Min repayments today | Change |
| $600,000 | $3,981 | $3,709 | -$272 |
| $1 million | $6,634 | $6,181 | -$453 |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2025 at the RBA average existing customer variable rate. Calculations assume the banks pass on each cut in full to existing variable customers the month after. February min repayment has been rounded to the highest dollar.
However, data from CBA released yesterday shows just 11% of its eligible customers chose to drop their repayments to the minimum following the August cut.
Canstar modelling highlights the flip side of keeping repayments the same: an owner-occupier with a $600,000 mortgage and 25 years remaining at the start of the cuts, who kept their monthly repayments unchanged, would now be contributing an extra $272 per month above the minimum amount required.
Over the long term, maintaining this higher repayment could potentially save them $76,536 in interest charges and see them repay their mortgage 3 years and 3 months early.
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| Impact of keeping monthly repayments the same after 3 cuts | |||
|---|---|---|---|
| Loan size at start of cuts (Feb) | Extra paid each month | Interest saved – life of loan | Time shaved off mortgage |
| $600,000 | $272 | $76,536 | 3 years, 3 months |
| $1 million | $453 | $127,560 | 3 years, 3 months |
Source: Canstar. Calculations are indicative only, based on an owner-occupier paying principal and interest with 25 years remaining on a starting variable rate of 6.31% in Feb 2025. Assumes cuts in Feb, May and Aug and that the banks pass on the cuts in full a month after the RBA change. Assumes cash rate remains at 3.60% thereafter and the borrower continues paying extra for the remainder of the loan.
What’s a good rate now?
With the cash rate likely on hold, borrowers seeking rate relief or wanting to get ahead on their debt reduction should be on the lookout for a competitive rate.
Our database lists the lowest variable rate for owner-occupiers at 4.99%, which is reserved for first home buyers, however, those refinancing may be eligible for rates as low as 5.08%.
Investors could be in a position to secure a variable rate as low as 5.24% for principal and interest repayments or 5.39% for interest-only.
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| Advertised variable rates on the Canstar database | ||
|---|---|---|
| Lowest rate | Competitive rate | |
| Owner-occupier, principal and interest | 4.99% | under 5.25%
(over 30 lenders) |
| Investor, principal & interest | 5.24% | under 5.45%
(over 20 lenders) |
| Investor, interest-only | 5.39% | under 5.70%
(over 30 lenders) |
Source: Canstar.
CPI results put question mark over a November cut
Last week’s ABS monthly CPI indicator results, which saw annual headline inflation clock in at 3.0% and trimmed mean inflation at 2.6%, was a big enough jolt for NAB to adjust its cash rate forecast, shifting the next cut out by six months to May 2026.
CBA, Westpac and ANZ all still expect a cash rate cut in November, however, each acknowledges it might not materialise at this meeting.
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| Current big four bank cash rate forecasts | |||
|---|---|---|---|
| Bank | Next cut | Total cuts to come in cycle | Cash rate at end of cuts |
| CBA | Nov 25 | 1 | 3.35% |
| Westpac | Nov 25 | 3 | 2.85% |
| NAB | May 26 | 1 | 3.35% |
| ANZ | Nov 25 | 1 | 3.35% |
If the RBA does cut the cash rate in November, an owner-occupier with a $600,000 mortgage and 25 years remaining would see their minimum monthly repayments drop by a further $87 and with three cuts already in effect, the total drop across the February, May, August as well as a November cut would be $359.
This assumes banks pass this next cut on in full to their variable customers.
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| Impact of RBA rate cuts on minimum monthly repayments | ||
|---|---|---|
| Loan size at start of cuts (Feb) | Cut in November | Across all 4 cuts (Feb, May, Aug, Nov) |
| $600,000 | -$87 | -$359 |
| $1 million | -$145 | -$598 |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2025 at the RBA average existing customer variable rate. Calculations assume the banks pass on each cut in full to existing variable customers the month after.
Borrowers don’t have to bank on a rate cut
Canstar’s data insights director, Sally Tindall says, “The Board’s preference for a gradual easing cycle will almost certainly push the cash rate back into a holding pattern at the end of tomorrow’s meeting.”
“Last week’s inflation data raised a few question marks as to how far into the inflation battle we really are, however, the Governor has said the Central Bank does not put much weight on the volatile dataset.
“With no real pressure coming from the jobs market, the Board should wait for the full September quarterly CPI results before making any potential move.
“As a result, there will be a lot riding on the next round of quarterly inflation figures to understand whether we’ll see further cuts this year.
“For those with a mortgage, don’t go banking on it.
“Thankfully, the three rate cuts are already translating into real savings for borrowers, tallying up to an estimated $272 a month in relief for a typical $600,000 mortgage. That’s a decent chunk of money that is already making a difference to household budgets.
“It’s astounding to see that so many eligible borrowers aren’t pocketing this relief into their bank account but rather, reinvesting it into their mortgage instead.
“By keeping their repayments unchanged, they’re effectively turning each RBA cut into an extra mortgage repayment, which, if kept up for the remainder of their loan, could see them save thousands.
“Borrowers looking to turbo-change the savings even further should consider switching to a lower rate mortgage. Right now, the average owner-occupier on a variable rate is estimated to be paying 5.53 per cent, yet there are more than 30 lenders on Canstar offering at least one variable rate under this mark.
“While the RBA will wait for and act on the data, borrowers don’t have to play this waiting game.”
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
