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Banks (Finance)

Mortgage Rates to Slide After Reserve Bank's Third Interest Rate Cut of the Year

Strategic Insights

— 2 min read

Borrowers with variable home loans will see their repayments fall by a further $111 a month, once their lender passes on the reduction, after the Reserve Bank announced its third interest rate cut of the year. The cut, which was followed by 20 banks announcing they would reduce their rates by 0.25%, has been met with frustration from some customers who will have to wait until late August for relief. Meanwhile, mortgage holders at the four biggest banks are charged an additional $7.5m collectively in interest per day when mortgage rates remain 0.25% higher.

Key Takeaways:

  • The Reserve Bank's third interest rate cut of the year will deliver a borrower with a $750,000 mortgage a further $111 off their monthly interest payments, once their lender passes it on, according to Canstar.
  • Only two of the banks to announce a cut on Tuesday delivered it the same day, leaving many customers waiting until late August for relief.
  • Mortgage holders at the four biggest banks (NAB, Westpac, Commonwealth Bank, and ANZ) are charged an additional $7.5m collectively in interest per day when mortgage rates remain 0.25% higher.
  • NAB said it would pass on the cut 13 days after the RBA's move, longer than the 10 days it waited to hand down May's cut.
  • Commonwealth Bank and ANZ will wait 10 days, as each did in May, to pass on the 0.25% cut.
  • A first-home buyer, Andrew Giraldi, has seen his lender, Macquarie, commit to passing on the rate cut within three days, saving him and his partner nearly $30 a week in repayments.
  • Variable rates have fallen by the same amount as the RBA's cash rate since the beginning of the year, despite the delays in banks passing on interest rate changes.
  • Over 30 lenders will offer variable rates of 5.25% or lower by the end of August, Canstar estimated.
  • It would take one more rate cut to see a crowd of banks offer rates as low as 5% and two more for major banks to reach that level, according to Canstar's data insights director, Sally Tindall.

Statistics:

  • The Reserve Bank's third interest rate cut of the year will save borrowers with a $750,000 mortgage an additional $111 a month, according to Canstar.
  • Mortgage holders at the four biggest banks are charged an additional $7.5m collectively in interest per day when mortgage rates remain 0.25% higher, according to Finder analysis.
  • NAB will pass on the 0.25% cut 13 days after the RBA's move, while Commonwealth Bank and ANZ will wait 10 days.
  • Over 30 lenders will offer variable rates of 5.25% or lower by the end of August, Canstar estimated.
  • 99% of new loans since late 2024 have been on variable rates, according to CommBank and Westpac data.
  • Homebuyer loans have risen almost $40bn from January to July, while investor loans have jumped nearly $20bn, according to APRA data.

Sources:

  • [1] Canstar
  • [2] Finder
  • [3] Reserve Bank of Australia
  • [4] Sally Tindall, data insights director at Canstar
  • [5] APRA
  • [6] CommBank
  • [7] Westpac
  • [8] MACQUARIE GROUP LIMITED
  • [9] RBA Governor Michele Bullock

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