When the Reserve Bank of Australia (RBA) announces a drop in the cash rate, it’s like a ripple effect through the economy—and your mortgage is right in the splash zone. But what does it actually mean for your home loan? Should you celebrate, refinance, or just sit tight?
Let’s break it down and help you make the most of the rate cut.
🧠What Is the Cash Rate?
The cash rate is the interest rate the RBA charges on overnight loans between banks. It’s the baseline that influences everything from savings accounts to mortgage rates. In yesterdays meeting the RBA dropped the cash rate from 3.85% to 3.60%
đź“Š Why the RBA Cuts the Rate
- Stimulate economic growth
- Encourage borrowing and spending
- Ease financial pressure on households
Think of it as the RBA turning down the heat to help cool inflation or warm up a sluggish economy as it wants to keep inflation between 2-3%.
🏠What Happens to Your Mortgage When Rates Drop?
đź’¸ Variable Rate Loans: You Might Pay Less
If you’re on a variable rate mortgage, a cash rate cut could mean your lender lowers your interest rate. That means:
- Lower monthly repayments (but you may well need to ask them to lower your repayment)
- More money in your pocket
- Potential to pay off your loan faster
But here’s the kicker: lenders aren’t required to pass on the full rate cut. Some might pass on a portion, others might hold steady.
Most importantly- Check to see if they are going to amend your repayment based on the new interest rate cut. Many banks will keep your repayment as it was previously. You’re not losing out here but it means that you pay off your home loan quicker as the extra money will come off the principal in your loan. So if lowering your repayment is more important to you, then you should reach out to your broker or bank.
đź“Ť Ask us to do a mortgage comparison free of charge for you. Look at our refinancing page here
đź”’ Fixed Rate Loans: No Immediate Change
If you’ve locked in a fixed rate, your repayments stay the same—regardless of what the RBA does. That’s the trade-off for stability.
However, if your fixed term is ending soon, you’ll want to keep an eye on what rates are doing. You could be in for a pleasant surprise—or a rude awakening.
🧠What Should You Do After a Rate Cut?
🕵️‍♂️ Step 1: Review Your Current Mortgage
Pull out your loan statement (or log into your lender’s app) and check:
- Your interest rate
- Your repayment amount
- Whether you’re on a fixed or variable loan
If your rate hasn’t budged after the RBA cut, it might be time to ask: Is my lender giving me a fair deal?
🔄 Step 2: Consider Refinancing
Refinancing can help you:
- Lock in a lower rate
- Reduce your repayments
- Access equity for renovations or investments
đź“Ť Explore our refinancing options
🧮 Step 3: Use the Savings Wisely
- Make extra repayments to reduce your loan term
- Build an emergency fund
- Invest in home improvements that add value
đź’ˇ Use our Mortgage Repayment Calculator
🧩 Bonus Tips for First Home Buyers
If you’re a first-time buyer, a rate cut could be the perfect time to jump in. Lower rates mean:
- Smaller deposit requirements
- Easier loan approval
- More affordable repayments
đź“Ť Check out our First Home Buyer Blog
📞 When to Call Your Mortgage Broker (That’s Us!)
If you’re unsure whether your lender passed on the rate cut, or you’re wondering if refinancing is worth it, don’t guess—ask.
At CBM Mortgages, we’re not just number crunchers. We’re your mortgage mates. We’ll give you honest advice, tailored to your goals, and help you make smart moves in a shifting market.
đź“Ť Book a free consult with Craig
đź“ť Final Thoughts
A cash rate drop isn’t just a headline—it’s a chance to take control of your mortgage and potentially save thousands. Whether you’re refinancing, buying your first home, or just curious about your options, now’s the time to act.
Because in the world of home loans, timing is everything—and we’re here to help you make the most of it.
Written by Craig McDonald 12/08/2025
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.
