Written by Craig McDonald and edited on 06/06/2025
Australian borrowers have received another reprieve with the Reserve Bank of Australia (RBA) today cutting the cash rate by 25 basis points to 3.85%. How much could this decrease your monthly mortgage repayments?
This is the second cash rate cut in 2025, as the RBA attempts to ease cost-of-living pressures on Australian families.
RBA Governor Michele Bullock said in a statement that the Board was satisfied that the risks to inflation had recently become more balanced.
“With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate,” Governor Bullock said.
How much might your mortgage repayments now decrease?
Unless you’re on a fixed-rate mortgage, hopefully your bank will soon follow the RBA’s lead and decrease the interest rate on your variable home loan. It is important to note that the banks don’t normally decrease your repayment to match the rate drop but they will if you ask them to.
For an owner-occupier with a 25-year loan of $500,000 paying principal and interest, this month’s 25 basis point rate cut means your monthly repayments could decrease by about $77 a month.
That would put $924 a year back into your household budget.
If you have a $750,000 loan, your monthly repayments will likely decrease by about $115 a month – or $1380 per year.
Meanwhile, a $1 million loan could decrease by about $154 a month – or $1848 a year.
This all assumes that your lender automatically passes on the full 25 basis point cut to your home loan.
Another thing to consider is that not all lenders automatically reduce variable home loan repayment amounts in line with rate cuts.
Some lenders simply maintain your repayment amount at the old level. It’s just that more of your money goes towards paying off the principal (rather than the interest) each month. But you can ask them to reduce your repayments in line with their cuts.
To find out what your lender is doing with your loan, get in touch with us in a few days once the dust has settled.
What do I need to do to lower my repayment based on the RBA rate cut?
Reach out to your bank as a first step and they will guide you on the process. Alternatively log into your internet banking and click on your loan details. With most of the major banks they will guide you on the process of the process to make that change. If you would like to calculate your new repayments please go to our calculators page. Click here
Why do not all banks amend your repayments on the RBA rate drop?
The reason is to try and assist you paying off your mortgage over a shorter loan term. The additional savings on the interest on the rate drop comes directly off your loan limit and therefore reduces your loan term. They also believe that because you was making these repayments previously then you can carry on to do so. If you would like them amended then follow our steps below.
Feeling the strain of your mortgage? Let’s talk
Even with this latest rate cut, many Australian households are still grappling with living costs and interest rates that are higher than when they first took out their home loan.
If it’s been a while since your last home loan review, now could be a good time to check in. You might be able to improve your situation – and we’re here to help you explore your options.
This could include renegotiating with your current lender, refinancing to another lender, or debt consolidation.
Every household is unique, and we’re committed to helping you find a solution that fits your needs. To understand more on how to refinance please visit our dedicated page on the process, please click here
Or click here for our blog post on refinancing or keep up to date with all our blog posts here
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