Navigating Australia’s financial and property landscape is not always a stress-free experience, but for the first time since 2020, the Reserve Bank of Australia (RBA) has announced a 0.25% rate cut, bringing the official cash rate to 4.10%. 

If you’re a mortgage holder, a first-home buyer, or someone eyeing the property market, here’s everything you need to know about the impact of this rate cut—and how you can take advantage of it.

Why Did the RBA Cut Rates Now?

The RBA has been navigating a complex balancing act in recent years. After consistently raising rates to combat surging inflation, Australia is now seeing signs of easing in core inflation levels. 

Paired with concerns about slowing economic growth, the RBA’s decision to cut rates can be seen as a strategic move to give Australians some breathing room. In its statement on monetary policy, the RBA said:

“Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.

“In the December quarter underlying inflation was 3.2 per cent, which suggests inflationary pressures are easing a little more quickly than expected.”

“There has also been continued subdued growth in private demand and wage pressures have eased. These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range.”

Economist Stephen Koukoulas believes that the RBA aims to “stop punishing the economy.” With rate cuts, there’s potential to inject more cash flow into households, allow borrowers to save on repayments, and create room for economic growth in key sectors like housing and retail.

But what does this mean for you? Let’s break it down.

What Does This Rate Cut Mean for Borrowers?

If you’re a borrower, today’s announcement could spell good news, especially if you have a variable-rate loan. Here’s how:

Lower Mortgage Repayments

Borrowers with variable-rate mortgages may see their monthly repayments drop, depending on whether their lender passes on the full 0.25% cut. 

Home loan amount ($)	Monthly repayment (May ’22)	Monthly repayment (Jan ’25)	Approx. Monthly savings with Rate Decrease of 0.25%
$500,000	$2,376	$3,448	$78
$750,000	$3,564	$5,172	$118
$1,000,000	$4,753	$6,896	$157
*Based on 25 year terms, Owner Occupier Principal & Interest, LVR <80%. Average variable rate of 3.02% p.a. as of May 2022, and 6.73%p.a. as of 30 January 2025. Source: Mozo

If high mortgage repayments have been a source of stress, this rate cut might ease that pressure. However, it’s essential to confirm with your lender or your mortgage broker whether you will receive the reduction in full.

Opportunities to Refinance

If you’ve been considering refinancing your home loan, now might be the perfect time. Lenders often become more competitive during periods of rate cuts, offering better deals to attract borrowers. Comparing loans and working with an experienced mortgage broker, can help you secure a lower rate and potentially save thousands over the life of your loan.

How Will the Property Market Respond?

The Australian property market has seen considerable fluctuations over the past few years, with higher interest rates putting substantial pressure on buyers and developers. A rate cut, however, has the potential to stimulate activity in the market.

Boost for First-Home Buyers

For first-home buyers, lower interest rates mean improved affordability. Reduced borrowing costs could enable more Australians to enter the market, particularly in areas where property prices have cooled.

CoreLogic’s data shows that property values in January remained steady at -0.03%, with declining values in Melbourne (-0.6%) and Sydney (-0.4%). Meanwhile, regional areas witnessed modest growth, with dwelling values rising by 0.4%. A rate cut may help stabilise declining markets and increase buyer confidence moving forward.

Will House Prices Rise Again?

While rate cuts may boost buying activity, significant house price increases may not occur just yet. Stephen Koukoulas told Property Insights that the market is experiencing a “neutral” phase, with more stock available and auction clearance rates stabilising. The supply-demand balance could prevent any drastic price surges in the near term.

How Does the Rate Cut Impact Housing Supply?

Australia’s housing supply remains a challenge, with developers grappling with rising construction costs and planning delays. The Government currently has a target of 1.2 million new dwellings over the next five years, which relies heavily on private sector construction. 

The Housing Australia Future Fund (HAFF) and the National Housing Accord aim to deliver approximately 40,000 affordable and social homes out of the 1.2 million housing target. This means that 97% of the goal relies heavily on private sector development and contributions across the broader housing market.

While rate cuts may provide incentives for new builds, Koukoulas doubts that the pace of construction will match demand, stating, “If they build 1.2 million houses in five years, I’ll swim across Sydney Harbour.”

Still, a lower rate environment could encourage developers to invest in high-density housing projects, helping address the supply shortage over time. For borrowers considering construction loans, this may also lead to more favourable opportunities for financing new builds.

Will All Lenders Pass On the Rate Cut?

“So if they deem that a rate cut is needed, and it’s not passed on, curiously, they’ll probably cut a little bit more than the markets have currently priced in if we don’t get those cuts passed through.”

“Because they want to see that the people with the nearly $2 trillion of mortgages that are out there, give or take, save some money on that so they can spend money, to get the economy growing and keep that unemployment rate near a four rather than going up to 4.5 or 5%.”

What Should Borrowers Do Next?

Here are actionable steps borrowers can take to capitalise on the rate cut:

1. Contact Your Mortgage Broker or Lender

Reach out to your mortgage broker who can negotiate with your lender on your behalf. Your broker can find out if your lender plans to pass on any potential rate cuts, whilst also keeping an eye on whether there are better options out there for you. 

2. Explore Refinancing

Work with a mortgage broker to compare rates and lock in the best deal. Yellow Brick Road offers solutions tailored to your unique needs, helping you save on repayments and achieve your financial goals.

3. Review Your Budget

Lower repayments can free up cash flow. Consider using these savings to pay off additional loan principal or bolster your emergency fund.

4. Keep An Eye on Future Rate Movements

The rate cut marks the first reduction in years, but more could follow if economic conditions warrant. Stay informed about RBA announcements to plan effectively.

Looking Ahead: A Year of Cautious Optimism

While today’s rate cut is a welcome relief, it’s important to take a measured approach to what lies ahead.

Koukoulas outlined that the futures market, that is, investors who make trades on whether rates will come down or go up, “are effectively saying we think there’s going to be 75 to 100 basis points of rate cuts between today and early 2026.”

“So the Official Cash Rate of 4.35% today could be 3.35 to 3.5%ish, without putting a pin point accurate number on it. And to me, that’s about right.”

The best steps to take are individualised to you and your circumstances. 

Our goal is to empower you with the information you need to achieve your financial ambitions. Take your time to assess your options and remember that expert guidance is always within reach.

From securing better home loan rates to navigating the complexities of refinancing, our experts are here to guide you every step of the way.

The information is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial adviser. No material contained herein should be construed or relied upon as providing recommendations in relation to any legal or financial product. Yellow Brick Road Finance Pty Limited ACN: 128 708 109 – Australian Credit Licence (ACL): 393195.