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At its meeting today, the Reserve Bank of Australia (RBA) announced that the official cash rate will remain unchanged at 3.85%.
Despite a number of commentators, economists and markets preparing for a third consecutive rate cut, the RBA has taken its own route.
Here is what today’s announcement means for your mortgage, property prices, and the outlook ahead.
Why Did the RBA Leave Rates on Hold?
Despite strong evidence that Australia’s economy is softening and inflation is within the RBA’s target range, the RBA Board was unconvinced that the evidence in front of them demanded a third consecutive rate cut. The Board’s statement read:
“While recent monthly CPI Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were, at the margin, slightly stronger than expected.”
“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.”
In this month’s Property Insights with Mark Bouris, economist Stephen Koukoulas strongly disagreed:
“Inflation’s under control. The trimmed mean is at 2.4% and headline CPI is just 2.1%. These are the best numbers we’ve seen in years.”
Koukoulas also pointed to weak GDP figures, with the most recent quarterly number at just 0.2% and annual growth of 1.3%. He said this makes the case for easing policy very clear.
“With GDP growth this soft and inflation falling, the case for a rate cut was unambiguous.”
What About Property Prices?
House prices have started rising again, with Cotality (previously CoreLogic) reporting a fifth consecutive month of growth nationally.
“Monthly gains were recorded across almost every broad region of Australia, with Hobart (-0.2%), the only capital city or rest-of-state region to see a month-on-month fall,” CoreLogic reported.
Research Director Tim Lawless said that falling interest rates are the obvious catalyst for rising house prices:
“The first rate cut in February was a clear turning point for housing value trends. An additional cut in May, and growing certainty of more cuts later in the year have further fuelled positive housing sentiment, pushing values higher.”
For some, however, it is not just about interest rates.
“It’s not about affordability,” said Koukoulas. “House prices are going up because we’re not building enough. There’s strong immigration, and construction is lagging.”
So while interest rates help ease borrowing conditions, the lack of housing supply remains a key driver of price growth.
Looking Ahead
The RBA meets again in August. Many economists are forecasting at least one more cut before the end of the year, but the final decision will depend on upcoming data including the June quarter inflation figures and labour market trends.
Koukoulas said:
“We’re finally seeing some momentum in the right direction. Inflation’s low, the economy is soft, and interest rates are still restrictive. I’d expect at least one more cut before the year’s out, possibly two.”
How Much Could Borrowers Save with Another Rate Cut?
If you have a variable-rate mortgage, an August rate cut could reduce your repayments significantly. However, the benefit and timing depend on your lender.
Some lenders automatically apply rate cuts. Others require customers to request the change. This is where working with a mortgage broker can make a difference.
“There’s a real sense of relief out there,” said Mark Bouris. “Borrowers aren’t doing cartwheels in the street, but for a lot of people, this is the first breathing room they’ve had in years.”
With another RBA Board meeting in just six weeks, and armed with the second-quarter data on inflation, the RBA will likely be more confident to reduce rates for the third time in 2025. And for many Australians, the savings are would be a significant boost to their weekly budget.
Research from Finder shows how much borrowers could be saving compared to January 2025, assuming three rate cuts were passed on:
| Home Loan Size | Average Monthly Saving | Average Annual Saving |
|---|---|---|
| $500,000 | $134 | $1,613 |
| $750,000 | $202 | $2,420 |
| $1 million | $269 | $3,226 |
| $659,920 (national avg. home loan size – according to ABS) | $177 | $2,129 |
What Should You Do Now?
Now is a good time to review your loan. Here are four smart moves to consider:
- Try to increase your repayments if you can: This can help you pay off your loan faster and reduce interest over time.
- Use any savings to build a buffer: Extra money in your offset or savings account gives you flexibility and peace of mind.
- Review your loan structure: Especially if you are coming off a fixed rate or your goals have changed.
- Talk to an experienced mortgage broker: Not all lenders pass on rate cuts automatically. A broker can follow up on your behalf or negotiate a better deal.
You can also explore your numbers using our home loan calculators
