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While the consensus is that the central bank will reduce the cash rate again today, borrowers are being urged to ascertain how quickly their lender will pass on the saving.
The Reserve Bank of Australia’s (RBA) Monetary Policy Board will announce its cash rate decision for July this afternoon (8 July), with the market widely anticipating that it will lower the cash rate by 25 bps to 3.60 per cent.
This move would bring the cash rate down to 3.60 per cent, marking the third cut in the current easing cycle, which began in February of this year.
All of Australia’s big four banks have predicted a July rate cut, after Australia and New Zealand Banking Group (ANZ) became the last to move its forecasts.
ANZ is now expecting a 25-bp reduction in July, followed by another in August, suggesting that while a reduction is not certain today, it would be “the path of least regret”.
Westpac similarly revised its forecast to a July cut, though its chief economist Luci Ellis cautioned that it is “not the shoo-in the market seems to think it is”.
The Commonwealth Bank of Australia (CBA) also anticipates a 25-bp cut in July and another in August.
National Australia Bank (NAB), which was the first of the majors to forecast a July cut, expects further reductions in August and November, taking the cash rate to a terminal rate of 3.1 per cent.
The ASX 30 Day Interbank Cash Rate Futures (which calculates a percentage probability of an RBA interest rate change based on the market-determined prices in the ASX 30 Day Interbank Cash Rate Futures) was pricing in a 97 per cent expectation of a 25-bp interest rate decrease on Monday afternoon (7 July).
Impact on borrowers and the economy
A 25-bp rate cut could offer tangible relief to mortgage holders.
Canstar.com.au and Money.com.au have both estimated that such a cut could shave approximately $90 a month off repayments on a $600,000 mortgage, bringing total reductions to around $270 since the rate-cutting cycle began.
This would also likely see the average owner-occupier variable rate fall to 5.55 per cent, with over 30 lenders potentially offering variable rates under 5.25 per cent.
The Australian Council of Social Service (ACOSS) is also advocating another rate cut, with acting CEO Jacqueline Phillips stating that “with inflation well within the RBA’s target and decreasing, there is no reason to keep interest rates high”.
She highlighted that people on low and modest incomes have borne the brunt of past rate rises and desperately need relief, saying that current economic conditions support a cut that would foster stronger job growth and help restore incomes.
While a July cut seems highly probable, borrowers are now being urged to ascertain when their banks will pass on any rate reduction in full and how quickly.
Macquarie Bank is urging home owners and savers to actively engage with their banks, noting that in May, some banks waited an average of 12 days to pass on savings from lower home loan rates and some lowered savings account rates before home loan rates.
Ben Perham, head of personal banking at Macquarie Bank, emphasised the importance of a “rate cut refresher” for Australians, advising them to ask four questions of their home loan provider to ensure they are getting the best deal in a falling rate environment:
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When will you cut the interest rate on my home loan?
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Will my home loan repayments be adjusted automatically?
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Are you dropping my savings account rate before my home loan rate?
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Have I jumped through all the hoops to get the savings rate I signed up for?
He said: “It’s been a long time since a rate-cutting cycle and many Australians with a mortgage or savings account may need a rate cut refresher. The questions you need to ask your bank in a falling rate environment are different, and the answers they give you could cost you thousands. If you’re not getting the best deal, it’s time to switch.”
Previous rate cuts have shown that the majority of mortgagors have maintained their repayments at the same level, despite rate cuts. In May, CBA’s data showed that just 14 per cent of eligible home loan customers reduced their home loan direct debit repayments when their interest rates dropped in order to free up cash flow.
Lower interest rates are already fuelling property price growth and a steady rise in building approvals.
Data from the Australian Bureau of Statistics showed detached house building approvals rose by 3.2 per cent in May 2025 compared to the same month last year. Tom Devitt, senior economist at the Housing Industry Association, noted that with “two interest rate cuts in the back pocket, and further cuts expected, more buyers are able to sign that contract for a new home build”.
Recent statistics from finance brokerage Loan Market have also shown a 53 per cent year-on-year increase in pre-approval numbers following cuts this year.
[Related: Rate cuts drive pre-approvals rise]
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