The decision that could save some borrowers almost $150,000
How you could save off the back of the RBA’s predicted cash rate cut
07 July 2025
How you could save off the back of the RBA’s predicted cash rate cut
The RBA is expected to hand down its fourth cash rate decision of the year tomorrow, with a third cut widely tipped, bringing the cash rate down to 3.60%.
If lenders pass it on in full, borrowers with a $600,000 mortgage could see their minimum monthly repayments fall by $90 (see table further below).
However, many borrowers are opting to put this relief back into their mortgage, with new data from CBA released today revealing just 10% of eligible mortgage customers requested a reduction to their direct debit payments following the May rate cut.
Impact of maintaining higher monthly repayments
If a borrower with a $600,000 debt and 25 years remaining kept their monthly repayments the same and there are a total of four standard cash rate cuts in 2025 (February, May, July and August as per CBA’s forecast), they could potentially save almost $90,000 in interest over the life of their loan and pay off their loan four years early.
This assumes the borrower continues to make these higher repayments for the remainder of their loan and that the cash rate remains at the neutral rate of 3.35%.
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| Impact of keeping your monthly repayments the same following 4 cuts in 2025 |
|||
|---|---|---|---|
| Loan size | Extra paid each month | Interest saved – life of loan | Time shaved off mortgage |
| $600k | $359 | $89,113 | 4 years |
| $1m | $598 | $148,522 | 4 years |
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 6.32% in January 2025. Assumes mortgage rates change in line with the cash rate forecast from CBA, the banks pass on the cuts in full, and that the cash rate remains at 3.35% thereafter. Assumes the borrower continues paying extra for the remainder of loan.
Which banks automatically adjust repayments?
When the banks announce a rate cut, a variable borrower’s interest rate is automatically adjusted within 1 to 3 weeks.
However, not all banks automatically adjust a borrower’s monthly repayments. Westpac is the only big four bank that automatically lowers a customer’s direct debit if it’s set to the minimum.
For the other big banks – CBA, NAB and ANZ – customers have to proactively ask to have their repayments lowered.
- CBA: customers must ask the bank to lower their direct debit.
- Westpac: the bank automatically lowers customers’ direct debit if it’s set to the minimum.
- NAB: customers must ask the bank to lower their direct debit.
- ANZ: customers must ask the bank to lower their direct debit.
- Macquarie: the bank automatically lowers customers’ direct debit if it’s set to the minimum.
What would relief look like for those dropping their minimum repayments?
For an owner-occupier with a $600,000 debt today, and 25 years remaining on the loan, a cash rate cut tomorrow that’s passed on by their bank in full could see their minimum monthly repayments drop by $90.
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| Potential impact of a July RBA cash rate cut |
||
|---|---|---|
| New minimum monthly repayments | Difference | |
| $600,000 | $3,703 | -$90 |
| $750,000 | $4,628 | -$113 |
| $1,000,000 | $6,171 | -$150 |
Source: Canstar. Notes: based on an average variable owner-occupier paying principal and interest. Calculations assume a cut in July and that the banks pass it on in full to existing variable customers the month after.
What will a good rate look like if the RBA cuts tomorrow?
If the RBA cuts the cash rate to 3.60%, we estimates:
- 5.55% will be the average owner-occupier variable rate.
- 30+ lenders will offer at least one variable rate under 5.25%.
- The lowest rate could drop to a rate just above 5.00%.
Pay off your mortgage faster or get cash in hand
Canstar’s data insights director, Sally Tindall says, “If the RBA cuts the cash rate down to 3.60 per cent, borrowers across the country will breathe a small sigh of relief for the third time this year.”
“While the relief from an RBA cut is reasonably minuscule in comparison to the previous 13 hikes, four of which were doubles, every small release of pressure is welcome. A third cash rate cut in four meetings will also be further confirmation we’re now coming down the other side of the rate hike mountain.
“Whenever rate relief comes, we expect the banks to step up and pass it on in full to their variable customers. This would see the average owner-occupier variable rate drop to around 5.55 per cent, however, borrowers can and should aim lower than this.
“If the cash rate drops to 3.60 per cent, we expect there will be more than 30 lenders offering a variable rate under 5.25%, while the lowest could drop to just above 5 per cent. In fact, an eager low-cost lender looking to grab a headline could push variable rates into the 4’s if they stretch themselves.
“While it’s up to the banks to hand out the rate cuts, it’s borrowers who decide what to do with them. Keep your repayments the same and you could save tens of thousands of dollars in interest and kick your mortgage to the curb years early. Whatever small amount you can add to your mortgage regularly, can end up being life-changing.
“Not every family has the luxury of keeping repayments high and if that’s you, find out whether you need to make contact with your lender to get that relief into your bank account, rather than the mortgage.
“A cut could shave around $90 a month off the repayments on a $600,000 mortgage and while this represents just 2 per cent of the new payment amount, every bit of extra breathing room counts.”
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
