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The RBA has cut rates for the first time since 2020 - what could it mean for your home loan?
At its first meeting of 2025, the RBA announced a 25 basis point rate cut, signalling long-awaited relief for variable-rate mortgage payers.
18 Feb 2025
At its first meeting of 2025, the RBA announced a 25 basis point rate cut, signalling long-awaited relief for variable-rate mortgage payers.
KEY POINTS
- The RBA has cut the cash rate today for the first time since 2020.
- The cash rate began rising in 2022, driving the average variable interest rate higher.
- Today’s cut could mean that banks and lenders will pass on some relief to mortgage-payers.
The Reserve Bank of Australia has cut the cash rate by 25 basis points to 4.10 at today’s meeting, with banks and lenders around the country likely to cut their own home loan variable rates in the days and weeks to come.
The central bank cut the cash rate to zero in 2020 to help offset the economic effects of the pandemic, and began raising it again in 2022, in a yearlong series of hikes that saw the average variable home loan repayment jump significantly.
The nation’s big four banks had previously predicted rate cuts by May, but following stronger than expected quarterly inflation figures, all four brought their predictions forward to February, a cut that has now materialised.
How could today’s rate cut affect your home loan repayment?
When the RBA cuts the cash rate, banks and lenders tend to follow suit, cutting their own variable rates. Assuming lenders pass on today’s rate cut in full, then based on the RBA’s average existing variable rate, the typical Aussie variable rate home loan payer could save upwards of $92 per month.
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| Impact of a 0.25% point rate cut | |||
|---|---|---|---|
| Loan size today |
Current minimum monthly repayments |
New minimum monthly repayments |
Change |
| $600,000 | $3,984 | $3,892 | -$92 |
| $750,000 | $4,980 | $4,865 | -$115 |
| $1,000,000 | $6,640 | $6,486 | -$154 |
Source: Canstar.com.au — Note: calculations are estimates based on an owner-occupier paying principal and interest with 25 years remaining on their loan on the average variable rate of 6.32%. Assumes the RBA’s cash rate cut of 0.25% pts in February 2025 will be passed on by lenders in full. Does not factor in any additional repayments.
Owner occupied
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Owner occupied
20% min deposit
Redraw facility
Owner occupied
20% min deposit
Redraw facility
Owner occupied
10% min deposit
Redraw facility
Owner occupied
30% min deposit
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Owner occupied
40% min deposit
Redraw facility
Owner occupied
40% min deposit
Redraw facility
How can you save on your home loan repayments?
If you’re currently nearing the end of your fixed rate or looking for cheaper variable rate than your current lender is offering, you can compare home loans with Canstar to see if you can find a lender offering a deal that meets your needs and circumstances. With today’s cash rate announcement, many banks and lenders may be cutting their own rates, so if you approach your current lender and advise them that you are considering switching, you may be able to negotiate a lower rate directly with them.
If you’re considering refinancing from a variable rate to a fixed one, it may also be worth considering the pros and cons of fixing your home loan, and considering the current interest rates on home loans to see how fixed and variable rate loans stack up. You might also want to consider some of the home loan refinancing deals that might be available.
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Cover image source: fizkes/Shutterstock.com
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
Owner occupied
40% min deposit
Redraw facility
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