When will banks pass on your rate cuts?

For the first time in years, homeowners have received some welcoming news – the Reserve Bank of Australia (RBA) has officially cut interest rates. On February 18, 2025, the RBA announced a 0.25% reduction, bringing the cash rate down to 4.10%. After years of rising rates putting pressure on household budgets, this decision offers much-needed relief for mortgage holders.

But now comes the important question – when will your bank pass on the savings? While some lenders have been quick to announce reductions, others may take their time before adjusting home loan rates.

Why have rates been cut?

The RBA’s decision was driven by a combination of economic factors, particularly slowing inflation and weaker consumer spending. Here’s what’s happening:

• Inflation is cooling – Inflation has gradually eased to 3.2%, bringing it closer to the RBA’s target range of 2-3%.
• Households are tightening their budgets – Higher interest rates have made mortgage repayments more expensive, leading to lower consumer spending.
• The job market remains strong – While household spending has slowed, unemployment remains low, keeping many Australians in stable jobs.

Given these conditions, the RBA determined it was time to take some pressure off borrowers by lowering interest rates.

When will your bank pass on the rate cut?

Now that the RBA has announced the rate reduction, it’s up to individual banks and lenders to decide when they will pass on the savings. Some have already confirmed they will reduce rates in full, while others may delay or only make partial adjustments.

Here’s what you should do:

• Check your lender’s announcement – Most banks publish rate changes on their website or notify customers directly.
• Review your home loan statement – Your new interest rate should take effect once your lender makes the adjustment.
• Compare lenders – If your bank is slow to pass on the rate cut, it might be time to explore other options.

If you’re unsure about how your bank is responding, a mortgage broker can help you review your loan and ensure you’re getting the best deal.

How much could you save?

Even a small rate cut can reduce your monthly repayments, freeing up extra cash in your budget. Here’s how much a 0.25% reduction could save you each month:

• $500,000 mortgage → Save around $81 per month
• $750,000 mortgage → Save around $122 per month
• $1,000,000 mortgage → Save around $162 per month

Over the course of a year, a homeowner with a $750,000 loan could save approximately $1,464—a meaningful reduction for many households.

What should you do next?

If your lender is passing on the full rate cut, your repayments will automatically adjust once the new rate takes effect. However, this could also be a great time to review your home loan and ensure you’re getting the best possible deal.

Here are a few steps to consider:

• Check if your rate is still competitive – Even with the cut, some lenders may offer better deals. If you haven’t compared rates in a while, now is the time.
• Consider refinancing – With rates dropping, banks will be competing for new customers. If your current loan isn’t offering the best value, refinancing could save you even more.
• Continue making extra repayments – If possible, keep paying the same amount as before. This will help you pay off your mortgage faster and reduce long-term interest costs.

Are we set to see more rate cuts in 2025?

The big question now is whether the RBA will cut rates again. While nothing is guaranteed, many economists predict at least one more reduction later this year. Here’s what could influence future rate cuts:

• If inflation continues to fall, the RBA may lower rates further to support economic growth.
• If unemployment rises, the RBA might act to prevent a slowdown.
• If consumer spending picks up too fast, the RBA could hold off on further cuts to avoid pushing inflation back up.

For now, borrowers can take advantage of the current cut while keeping an eye on future announcements.

The RBA’s latest rate cut is a welcome relief for homeowners, offering a small but meaningful drop in mortgage repayments. While most major banks have announced they will pass on the full 0.25% reduction, the timing varies—so be sure to check when your lender is making the change.

If you’re happy with your home loan, enjoy the savings. But if you think you could be getting a better deal, now is a great time to compare lenders or refinance… At UFinancial, our expert mortgage brokers can help you find the most competitive rates and ensure you’re getting the best deal possible. Get in touch today to see how much you could save!