More than 500,000 Australian households get an RBA rate cut for the first time

The RBA’s interest rate cut will be a shot in the arm for households but deposit holders will lose out.

Mortgage holders will see interest rate cuts by March with Westpac.

The Reserve Bank’s decision to cut interest rates will be a shot in the arm for Australian households as the major banks announced they will pass on the full cut.

Within 20 minutes of the decision Westpac, CBA and NAB and ANZ all said they would pass on the 25 basis points cut.

According to financial comparison site Canstar it will be a new experience for 500,000 Australian households whose biggest investment has never seen the impact of an RBA cash rate cut.

Assuming the whole of the rate cut is passed, an owner-occupier with a $600,000 debt and 25 years remaining could see their minimum monthly repayments drop by $97, while repayments on a $750,000 mortgage would fall by $122 a month.

Canstar said if all lenders pass on the cut in full to their new customer variable rates, then there could be over 65 banks offering at least one variable rate starting with a 5 per cent.

“It’s incredible to think there are over half a million households that have never experienced a cash rate cut,” Canstar.com.au data insights director, Sally Tindall said.

“Compared to the last time Australians experienced a rate cut, a lot has changed. In November 2020, the country was in the early days of the pandemic, the cash rate had dropped to a record low of 0.10 per cent and core inflation was sitting at just 1.3 per cent.

“For a lot of borrowers who have been paddling hard to keep their mortgage repayments afloat, this could be a much-needed lifeline.

“While many people will use this relief to help balance the household budget, those who are in a position to keep their repayments at today’s level could benefit in the long run.”

NAB ‘quick’ rate cuts

NAB Group executive, Personal Bank, Ana Marinkovic said they were pleased to deliver the cut to the standard variable home loan interest rate to customers from February 28.

“We understand how tough it’s been for many Australians. “The extended period of high interest rates has placed real strain on household budgets and this rate reduction will help to ease the financial burden.

“We wanted to move quickly after the RBA’s decision to provide customers with certainty.”

Westpac

Westpac said it will decrease home loan variable interest rates by 0.25 per cent for new and existing customers, effective 4 March.

For deposit customers it said Westpac Life and Westpac eSaver rates would decrease by 0.25 per cent to 4.75 per cent per annum from February 28.

ANZ considering deposit rates

ANZ said its variable interest rates across its Australian home loans would decrease by 0.25 per cent, effective 28 February 2025.

ANZ said it “continues to review other interest and deposit rates”.

CBA

CBA will decrease home loan variable interest rates by 0.25 per cent across all home loan variable rates, effective February 28.

“For our savings customers, we continue to offer a range of options for those looking for both at call savings and term deposits. We will maintain our current 10-month term deposit special of 4.60 per cent per annum for a limited time, CBA Group Executive, Retail Banking Services, Angus Sullivan said.

Canstar.com.au data insights director, Sally Tindall.

How to save more

Ms Tindall said CBA and Westpac expected the cash rate will be cut a total of four times, down to a neutral level of around 3.35 per cent.

“If this happens and banks pass on each cut, a borrower with a $600,000 loan and 25 years remaining could potentially save over $80,000 in interest charges over the remainder of their loan by keeping their mortgage repayments exactly the same,” she said.

“If you can grit your teeth and tip any savings into your home loan, you’ll thank yourself down the track.”

However, for the Australians who have put away a record $1.7 trillion into bank deposits a rate cut means less interest earned.

Already more than 20 banks have reduced term deposit rates ahead of the RBA’s cash rate decision, with cuts of up to 0.95 percentage points.

While some banks still offer high savings rates (up to 5.50 per cent), potential RBA rate cuts could bring these down to 4.50 per cent by the end of the year.

Ms Tindall said an easing of the cash rate was always “a double-edged sword”.

“In the past two weeks, we’ve seen more than 20 banks cut at least one term deposit rate including each of the big four banks,” she said.

“Australians with money in term deposits could get a shock when their fixed period matures and they’re facing much lower interest rates. For those looking to lock up their hard-earned money in another term deposit, time may be of the essence.”

Compare the Market economic director David Koch said any cut to interest rates would be welcomed – given rates have climbed more than 4 per cent since the RBA started lifting rates almost three years ago.

“These rate cuts have been a long time coming and it’s going to give some breathing room in the household budget for Aussies already gasping for air,” he said.

National Retail Association interim chief executive Lindsay Carroll says the cut in cash-rate offers a much-needed boost to retail and consumer sentiment, but Labor needed to send businesses “signals around sustainable economic growth”.

“For our $430bn sector to thrive, we need to see focused policy making around areas such as combatting retail crime, strengthening supply chain resilience and bolstering small business support,” she said.

“Retailers, especially small businesses, are vital to the economy and contribute to job creation in local communities across Australia. The success of businesses in a community reflects the community’s overall well-being.”

Metricon chief executive Brad Duggan.

Australia’s largest home builder, Metricon, has urged Australians to take advantage of improved affordability while rates are low.

However, chief executive Brad Duggan warned that ongoing uncertainty in interest rates has caused unnecessary hesitation in the market, and without broader structural reforms, affordability pressures could return.

“This is a great opportunity for buyers to take the next step with confidence,” he said.

“With rates easing and strong demand in the market, now is the time to lock in a home before demand increases significantly.”

Despite the cut, Mr Duggan had been advocating for the Reserve Bank of Australia (RBA) to manage expectations differently in the months leading up to this decision.

“It’s not just about high interest rates—it’s the uncertainty around them that’s been the real problem,” he said.

“For months, homebuyers have been in limbo, unsure of whether rates would rise further or hold steady.

“If the RBA had signalled even three months ago that rates had likely peaked, that reassurance—even a qualified one—could have given people the confidence to act earlier rather than waiting for today’s cut.”

Housing Industry Association chief economist Tim Reardon said the decision will be welcomed by many, including many aspiring homeowners who, with renewed confidence, will re-enter the market and build their own home.

However, he warned that while it may be a catalyst for more on-the-ground home building activity, it will not be sufficient to achieve the Australian government’s target of 1.2 million homes over five years.

“Even with the ongoing expectation of cuts later in the year, there are far more important structural reforms required of policymakers for Australia to address its housing crisis,” he said.

“Up to half the cost of a house and land package in Australia is because of government taxes, costs and restrictions.

“Tax reform must address the burden of stamp duty on aspiring homeowners and the punitive surcharges imposed on the very investors needed to address Australia’s rental crisis. Shovel-ready land and associated infrastructure, especially transport and utilities, need to be brought to market faster.

Originally published as More than 500,000 Australian households get an RBA rate cut for the first time