When will your bank pass on the interest rate cut?
When Will Your Bank Pass on the Interest Rate Cut?
The Reserve Bank of Australia (RBA) has cut interest rates by 0.25%, bringing the cash rate down to 4.10%. This move provides relief to mortgage holders after years of consecutive rate hikes, which have significantly increased the cost of borrowing.
Why Did the RBA Cut Rates?
The RBA decided to lower the cash rate in response to key economic factors, including:
Cooling Inflation: Inflation has been easing faster than expected, now at 3.2%, which is getting closer to the RBA’s target range of 2-3%.
Reduced Consumer Spending: With higher interest rates, many households have cut back on discretionary spending, impacting retail sales and economic growth.
Strong Job Market: Despite slower spending, unemployment remains low, meaning most Australians are still in secure employment. However, the RBA is closely monitoring wage growth and potential job cuts.
By cutting rates, the RBA aims to support economic activity while ensuring inflation continues to decline at a sustainable pace.
When Will Banks Pass on the Rate Cut?
Banks have confirmed they will pass on the full rate cut, but the timing varies across lenders. Below is a breakdown of when each bank will adjust their rates:
ANZ - 28 February
CBA - 28 February
NAB - 28 February
Macquarie Bank - 28 February
Suncorp - 28 February
Westpac - 4 March
St. George - 4 March
Bank Australia - 4 March
ING - 4 March
Newcastle Permanent - 7 March
What Does This Mean for Your Mortgage?
Even a small 0.25% rate reduction can lead to noticeable savings for mortgage holders. Here’s how much the average borrower could save per month:
$500,000 mortgage → Save $81/month ($972 per year)
$750,000 mortgage → Save $122/month ($1,464 per year)
$1,000,000 mortgage → Save $162/month ($1,944 per year)
Over time, these savings can add up, helping borrowers manage their household budgets more effectively.
What Should You Do?
If your lender is passing on the rate cut, your repayments will automatically adjust. However, this is also an opportunity to ensure you're getting the best deal possible:
Review Your Home Loan: Compare your interest rate to current market rates—some lenders may offer better deals.
Consider Refinancing: If your current loan is not competitive, refinancing could help you secure a lower rate and save even more money.
Make Extra Repayments: If financially possible, continue paying the same amount as before the rate cut. This will reduce your loan balance faster and lower long-term interest costs.
Will There Be More Rate Cuts?
While the RBA has not committed to further cuts, its decision will depend on how inflation, employment, and consumer spending evolve in the coming months. Most economists predict at least one more rate cut in 2025, but this remains uncertain.
Factors that could influence future rate cuts include:
Further declines in inflation – If inflation continues to fall, the RBA may lower rates again.
Rising unemployment – A weakening job market could prompt the RBA to act.
Increased consumer spending – If spending rebounds too quickly, the RBA may hold off on further cuts to prevent inflation from rising again.
Final Thoughts
The RBA’s rate cut is a welcome relief for homeowners, reducing mortgage repayments and providing some breathing room in household budgets. However, the impact will depend on how quickly banks pass on the savings.
Now is the perfect time to review your home loan and explore potential refinancing options to maximize your savings. If you’re unsure of your next steps, speaking with a mortgage broker can help you make the best financial decision for your situation.
