The Reserve Bank of Australia (RBA) cut the cash rate by 0.25 percentage points to 3.85% on 20 May 2025, marking the second reduction this year.
This decision, driven by cooling inflation at 2.4% in the March quarter, raises a key question: which banks are passing on these savings to home loan customers?
Let’s find out!
Understanding The Latest RBA Decision
The Reserve Bank of Australia cut interest rates by 0.25 percentage points following its May meeting, responding to cooling inflation figures.
Inflation dropped to 2.4% in the March quarter, whilst underlying inflation—the RBA’s preferred measure—reached 2.9%. These figures represent substantial progress from the inflation peaks experienced in 2022.
Nonetheless, with inflation risks appearing more balanced, the RBA found reason enough to deliver this cut, aiming to provide relief without losing control of its long-term inflation targets.
Mortgage holders now stand to save significantly. Those with larger loan balances will notice the difference more, especially if their lender passes on the rate cut in full.
For borrowers looking to make the most of this change, now is the time to compare offerings.
What Does The RBA Rate Cut Mean For Borrowers?
The RBA’s cash rate influences the interest rates banks charge on loans. When the cash rate drops, banks typically lower variable home loan rates, reducing monthly repayments for borrowers.
The 3.85% cash rate, the lowest since April 2023, follows a February 2025 cut from 4.35% to 4.1%. Inflation, now at 2.4% with underlying inflation at 2.9%, is within the RBA’s 2-3% target, prompting this move.
However, banks don’t always pass on the full cut, and repayments may not decrease automatically.
Borrowers must act to benefit. For instance, maintaining higher repayments can reduce the loan principal faster, saving interest over time.
Which Banks Are Passing On The Rate Cut?
Major banks and smaller lenders have responded to the RBA’s May 2025 cut.
The Big Four—Commonwealth Bank (CBA), NAB, ANZ, and Westpac—have all committed to passing on the full 0.25% reduction to variable home loan rates.
Other lenders, including Macquarie Bank, Bankwest, Suncorp, and online providers like Athena and Unloan, have also announced cuts.
Effective dates vary, with some banks acting faster than others.
The table below lists key lenders, their rate cut decisions, and when the changes take effect, based on announcements as of 22 May 2025:
| Lender | Rate Cut | Effective Date | Notes |
|---|---|---|---|
| NAB | 0.25% | 30 May 2025 | First to announce; customers must opt-in to lower repayments |
| CBA | 0.25% | 30 May 2025 | Only 14% of customers reduced repayments after February cut |
| ANZ | 0.25% | 30 May 2025 | Reviewing other rates; encourages customers to seek best solutions |
| Westpac | 0.25% | 3 June 2025 | Also cut savings rates; latest among Big Four to implement |
| Macquarie Bank | 0.25% | 23 May 2025 | Fastest implementation among major lenders |
| Athena, Unloan | 0.25% | Immediate | Online lenders with quick adjustments |
| ING, Bank SA, St George | 0.25% | 3 June 2025 | Aligned with Westpac’s timeline |
| Pepper Money | 0.25% | 5 June 2025 | Later implementation for non-bank lender |
How Much Can Borrowers Save?
Savings depend on your loan size. Financial comparison site Canstar estimates the impact of the 0.25% cut for owner-occupiers with principal and interest repayments.
A $500,000 loan saves about $76 monthly, while a $600,000 loan saves $91. For a $750,000 loan, monthly repayments drop by $114, and a $1 million loan sees $152 in savings.
These figures assume the lender passes on the full cut. Fixed-rate loan borrowers won’t see changes until their term ends, unless they refinance, which may incur fees.
Always check your loan terms, as features like offset accounts or extra repayments affect savings.
Will Repayments Drop Automatically?
Not always. Many banks, including NAB, CBA, and ANZ, require borrowers to request lower repayments.
For example, CBA noted only 14% of customers reduced repayments after the February 2025 cut, with most opting to maintain payments to reduce the principal faster.
NAB’s Ana Marinkovic highlighted that 95% of their customers kept repayments unchanged after the last cut, potentially saving $83,000 in interest and two years on a $550,000 loan.
Contact your lender to confirm the rate cut is applied and to adjust repayments if desired.
Why Working With Finance Brokers In Melbourne Matters?
Guiding through this complex rate environment requires expertise that many borrowers lack. Home loan brokers in Melbourne possess comprehensive knowledge of current market rates across multiple lenders, enabling them to identify opportunities that individual borrowers might miss.
Mortgage brokers in Melbourne monitor rate changes constantly, understanding not just headline rates but also the terms and conditions that affect total borrowing costs.
The best mortgage broker in Melbourne can compare dozens of lenders simultaneously, ensuring you access the most competitive rates available for your specific circumstances.
A local home loan broker in Melbourne offers additional advantages through their understanding of regional market conditions and relationships with both major banks and smaller lenders.
They can negotiate on your behalf and identify products that align with your financial goals.
Talk To A Mortgage Broker In Melbourne Who Puts You First!
The RBA’s rate cut means this could be a great time to get a better deal on your home loan, but not all banks are offering the same savings. At LTE Loans, our expert brokers compare rates across 30+ lenders to find the most competitive option for you.
With no hidden fees, fast approvals, and custom solutions, even if you’ve been rejected before, we’ll help you save more with less stress. Reach out now, and let’s see how much you could cut from your repayments.
