If you’ve been watching the headlines, you’ve probably heard the buzz—interest rates are likely to drop at the Reserve Bank of Australia’s (RBA) next meeting. While this is great news for homeowners and buyers, the big question is: what does this actually mean for you?
Let’s break it down in a way that makes sense.
What happens when rates drop?
When the RBA lowers the official cash rate, banks and lenders often follow by cutting their home loan interest rates—but not always at the same time or by the same amount. Here’s what typically happens:
- Some lenders act fast. Smaller banks and online lenders keen to attract borrowers often pass on the full rate cut almost immediately.
- Major banks take their time. Big names like ANZ and CBA might wait a week or two before making any changes. Macquarie tends to be one of the first, while ANZ usually tends to be one of the last.
- Not every lender passes it all on. Some may reduce rates by only a fraction of the RBA cut, keeping a portion for themselves.
- Fixed rates may or may not change. Some lenders might keep fixed rates steady, while others drop them to attract new borrowers.
Where are rates right now—and where could they go?
Currently, a competitive variable rate sits at around 6.14%. If a 0.25% rate cut happens, we could see good deals drop to 5.89%. Some lenders may hold back their reductions for marketing reasons—delaying cuts to offer what looks like an “incredible deal” later on.
Patience can pay off here!
What should you do when rates drop?
Now, you might be thinking: Do I jump ship for a better deal? Not so fast. Here’s the best approach:
- Don’t rush to refinance. It’s tempting to immediately chase the lowest rate, but give your lender a chance to respond first. They might match or beat competitor rates if you ask.
- Consider fixed rates. With rates on the move, fixed loans might suddenly look appealing. If stability is your top priority, now could be the time to explore locking in a lower rate.\
- Keep your repayments the same (If you can!). This is where you can get real financial wins. If your rate drops but you continue making the same repayments: On a $600,000 home loan, a 0.25% rate cut could shave two years off your loan term. A 0.50% cut could save even more, potentially wiping out tens of thousands in interest. Heads up! Banks will automatically reduce your repayments unless you ask them to keep them at the higher rate. You’ll need to call your lender to request this change.
- If money’s tight, enjoy the savings. If you’re feeling the squeeze with rising costs, a rate cut can give you some breathing room. A 0.25% cut on a $600,000 mortgage could mean $90–$100 extra in your pocket each month—money that could go towards groceries, bills, or even a small holiday.
The bottom line: Be patient
Interest rate cuts create opportunities—but only if you play your cards right. The best move? Be patient, watch how your lender responds, and make a decision that benefits your long-term finances. Whether it’s refinancing, fixing your rate, or keeping your repayments steady, now is the time to put yourself in a stronger financial position.
If you’re unsure what to do next, chat with us!
With interest rates shifting, now is the perfect time to reassess your mortgage and ensure you’re making the most of the changes. If you’d like expert guidance, request a Free 30-Minute Finance Strategy Session where you will:
- Get a realistic understanding of your current situation and how much you could borrow
- Gain insights into the best lending options available to you
- Discover ways to save money on interest, fees, and charges specific to your circumstances
- Get up-to-date information on rates, loan structures, and market conditions
- Learn how we can help you secure a loan that could save you thousands
This no-obligation free session is held with one of our experienced mortgage brokers. It’s not a sales pitch—just real, strategic advice tailored to your situation, so you can make smarter financial decisions.
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Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).