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For the first time since May 2023, the cash rate has dropped below the 4 per cent mark, now sitting at 3.85 per cent.
From the moment the announcement was made, most lenders seemed to honour the target, staggering implementation over the next couple of weeks.
Now, industry leaders are having their say. Some welcomed the RBA’s decision, while others are leveraging the news to highlight other issues.
MFAA CEO Anja Pannek
Anja Pannek said that the decision to drop the rate was unsurprising but still a welcome sight for borrowers doing it tough.
“After 13 interest rate rises between May 2022 and November 2023, the Reserve Bank’s move today will help many borrowers,” Pannek said.
The MFAA encouraged borrowers and brokers to explore refinancing opportunities and try to secure a better rate.
FBAA managing director Peter White
The other major broker association, FBAA, discussed the RBA call. Peter White called on lenders to reduce variable rates by the full 25 bps.
“Our advice to existing borrowers is to ensure your bank passes on the full cut and if it does not, to contact them and ask for a rate reduction,” he said.
“Lenders often favour new borrowers at the expense of their existing customers which is wrong. However, borrowers have the power to act themselves, and if your lender refuses to reduce your rate by the full margin, you can consider other financing options.”
White used the platform to highlight the serviceability buffer. Currently at 3 per cent, FBAA has called for it to be reduced 0.5 per cent to 2.5 per cent.
Cotality research director Tim Lawless
The property research company Cotality (formerly CoreLogic) delved into the relief this cut will bring borrowers.
Tim Lawless said that the average variable rate for outstanding owner-occupier loans is expected to fall to around 5.81 per cent. This will reduce repayments on a $750,000 loan by approximately $81 per month.
He believes that the borrower benefits will help spur some activity in the housing market.
“This combination of lower interest rates and improved sentiment is likely to support increased activity in the housing sector, given that there is generally a correlation between consumer sentiment and home sales volumes. We may also see continued upward pressure on housing prices, extending the broad-based recovery in values that began after the February rate cut,” said Lawless.
“While lower rates should help to make housing more accessible, further upward pressure on prices would offset the benefits of improved loan serviceability.”
Tom Devitt, senior economist at HIA
The housing body representative said the rate cut will “act as a catalyst for more on-the-ground home building activity.”
The cut in February, along with predicted additional cuts throughout the rest of 2025, will help improve home construction, said Tom Devitt.
“Several states, like Western Australia, Queensland and South Australia, are already seeing improving home building volumes on the ground on the back of strong population growth, tight labour markets and recovering household incomes,” he said.
“Reduced mortgage costs will provide an added boost and potentially also bring some of the lagging states back to the table.”
Callam Pickering, APAC economist at Indeed
The job site’s economist discussed the outcome, saying that the current unpredictability in the market is making it hard for people to plan ahead.
However, he said there are more risks associated with leaving rates high than there are with cutting them.
“On that basis, cutting rates again was the best way forward for a cautious central bank,” said Callam Pickering.
“The market continues to price in two more rate cuts by the end of the year. The RBA certainly won’t make any commitments to that effect, but it seems like a plausible scenario.
“The simple fact is that the global economic outlook has soured and Australia’s major trading partners are at the centre of it. The RBA will need to cut rates at least another couple of times to provide sufficient support to households and businesses, while ensuring that the unemployment rate remains low and we avoid recession.”
Monash University economic lecturer Dr Isaac Gross
The academic highlighted that a key reason behind this cut was the easing of the cost-of-living crisis. Dr Isaac Gross is predicting two additional cuts by the end of 2025.
“However, this outlook is highly contingent on two major factors: the continued moderation of inflation and the potential impact of Donald Trump’s trade policy,” he said.
“Should Trump re-commit to radically higher tariffs, we would almost certainly see a large reduction in interest rates. On the other hand, the chance for further cuts could evaporate if inflation stays stubbornly high, which remains a real risk given the strength of recent job numbers and wage growth data.”
[Related: RBA cash rate reduced to 3.85%]
