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RBA holds at 4.10% as variable rate market competition heats up
The RBA has held the cash rate at 4.10%, as new Canstar research shows Australians with variable home loans are taking matters into their own hands.
01 Apr 2025
The RBA has held the cash rate at 4.10%, as new Canstar research shows Australians with variable home loans are taking matters into their own hands.
The Canstar survey of over 1,100 variable rate borrowers shows more than half will consider refinancing to a lower rate lender following the first cash rate cut in over four years:
- 55% said they will consider refinancing to a lower-rate lender after the February rate cut;
- 24% said no, they will just accept the rate cuts passed on by their lender;
- 14% said no, they had already refinanced in the last 12 months; and
- 7% said no, the cost or effort of refinancing outweighs the benefits.
These findings are in line with recent research from mortgage settlement platform, PEXA, which found refinancing had increased 8.4% in February compared to the same month last year across mainland Australia with strong growth also in March.
How much can a borrower save by refinancing?
Analysis from Canstar Research estimates that a complacent owner-occupier is on a variable rate of 6.86% while the average is 6.06%, following the February cut.
However, market competition is pushing rates down.
Two weeks ago, Westpac announced a new lowest rate of 5.84% in a bid to step up lacklustre growth in residential mortgages (see today’s APRA data at end). As a result, the bank now has the equal lowest variable rate among the big four, alongside ANZ.
However, borrowers can potentially do even better. Canstar shows there are now around 35 lenders offering at least one variable home loan rate under 5.75%.
If the complacent borrower refinances to a competitive rate under 5.75% they could potentially save over $12,000 in interest charges over the next two years. This includes $1,000 of switch costs.
Even an owner-occupier on an average variable rate could save almost $3,000 over the next two years if they refinance to a rate under 5.75%, including switch costs.
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| Potential saving from refinancing on a $600k loan | ||
| Change in rate | Savings over 2 years
(interest + switch fees) |
|
| Complacent borrower | 6.86% to 5.74% | $12,416 |
| Average borrower | 6.06% to 5.74% | $2,828 |
Source: canstar.com.au. Notes: based on an owner-occupier paying principal and interest and a 25 year loan term with a $600k debt. Assumes cash rate changes in line with ANZ forecast, and change is applied one month after the change. Starting rates are estimates based on RBA average rates. Calculations include $1,000 of switch fees but does not factor in ongoing fees or any extra repayments.
Many borrowers haven’t seen their repayments drop following the February cut
While the vast majority of lenders passed on the February cash rate cut in full within the first two to three weeks, many customers are still yet to see their minimum monthly repayments drop.
Westpac and Macquarie will automatically lower the repayments of those variable customers who pay the minimum and have a direct debit set up. However, this process has only just begun, with most customers set to see their repayments decrease in April, depending on their mortgage payment date.
CBA, NAB and ANZ customers won’t see their minimum repayments and corresponding direct debits automatically lowered. These customers have to ask their bank to drop their rate, which some may not have even done yet.
Too many balls in the air for the RBA to contemplate a cut
The delay in the February rate cut will be one of many factors weighing on the new RBA Board’s mind today and tomorrow as it contemplates Australia’s cash rate setting.
Global uncertainty, including the US tariffs, will also be playing on the RBA’s mind.
While core inflation looks to be heading back towards the RBA’s 2.5% target, Australia’s robust unemployment rate of 4.1% and a pickup in economic activity gives the RBA the time it needs to take stock.
Three of the big four banks still expect three more cuts in 2025
CBA and Westpac expect three more cash rate cuts this year, with the next one arriving in the May meeting.
NAB expects three more this year, and one more in the first quarter of 2026.
ANZ expects just one more cash rate cut in August.
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| Current big four bank cash rate forecasts | |||
| Next move | Number of cuts still to come |
Cash rate at end of cutting cycle |
|
| CBA | -0.25% in May | 3 | 3.35% |
| Westpac | -0.25% in May | 3 | 3.35% |
| NAB | -0.25% in May | 4 | 3.10% |
| ANZ | -0.25% in August | 1 | 3.85% |
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Potential impact of further RBA rate cuts
A rate cut in May would result in a $91 drop to a borrower’s minimum monthly repayments on a $600,000 loan with 25 years remaining, assuming they are on the average rate of 6.06%.
Three cuts before the end of the year could see this same borrower’s minimum monthly repayments drop by $268 in total.
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| Potential impact of rate cuts on monthly repayments: $600k loan |
|||
| Rate | Monthly repayments |
Change in monthly repayments |
|
| Current | 6.06% | $3,888 | – |
| 1 cut | 5.81% | $3,797 | -$91 |
| 2 cuts | 5.56% | $3,708 | -$180 |
| 3 cuts | 5.31% | $3,620 | -$268 |
Source: canstar.com.au. Notes: based on an owner-occupier paying principal and interest starting in April 2025. Calculations assume cuts in the middle of the next three quarters and that the cuts are passed on by the banks the next month. Assumes Feb rate cut has been passed on and that the current rate is 6.06%.
Canstar’s Data Insights Director, Sally Tindall says, “The rate cut party back in February was a one hit wonder – at least for now.”
“At the last press conference, Governor Bullock came out and said we should not expect a flurry of cuts. She didn’t even wait to get asked it as a question. That’s just how front of mind it was for the Governor and the Board.
“While inflation has continued to make good progress, it will not be enough to force the RBA’s hand into back-to-back cuts, particularly in light of recent global volatility, including the Trump tariffs.
“The ever-calm RBA will not jump at these storm clouds prematurely. It won’t want to risk the progress already made in the inflation battle by cutting too soon or by too much.
“The RBA often cuts in quick succession because it’s under pressure. Not this time around. Australia’s robust unemployment rate of 4.1 per cent and the most recent GDP results give the central bank plenty of leeway.
“If you’ve got a mortgage, plan to get a rate cut yourself rather than relying on the RBA to plate one up.
“Banks are still in the mood to haggle, however, if you want the sharpest rates in town you may need to ditch and switch.
“If you’re an owner-occupier with a good track record of paying off your mortgage on time, there’s no reason why you shouldn’t be on a rate starting with a ‘5’.
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| Lowest advertised variable rates for refinancers |
||
| Lender | Rates from: |
LVR |
| Pacific Mortgage Group | 5.64% | 80% |
| People’s Choice | 5.64% | 70% |
| RACQ Bank | 5.64% | 60% |
| The Capricornian | 5.64% | 97% |
| Australian Mutual Bank | 5.64% | 60% |
Source: canstar.com.au. Based on owner-occupier principal and interest variable rate loans. Excludes intro, eco and special condition loans. LVR and other conditions may apply.
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| Big four banks – value of residential mortgages: February 2025 |
|||
| Bank | Amount | Monthly change |
Year-on-year change |
| CBA | $580.8 billion | +0.3% | +6.0% |
| Westpac | $483.4 billion | +0.1% | +3.7% |
| NAB | $327.3 billion | +0.3% | +3.1% |
| ANZ | $311.3 billion | +0.4% | +5.9% |
Source: canstar.com.au. Based on APRA Monthly Authorised Deposit-taking Institution Statistics, February 2025 released 31 March 2025. Includes both owner occupied and investor loans to households for the big four banks. ANZ figures do not include the former Suncorp mortgages.
Cover image source: Suntezza/Shutterstock.com
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
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