RBA cuts cash rate to two-year low of 3.60%

The Reserve Bank of Australia (RBA) delivered a widely expected cash rate cut on Tuesday afternoon, lowering the official rate by 25 basis points.

"With underlying inflation continuing to decline back towards the midpoint of the 2–3 per cent range and labour market conditions easing slightly, as expected, the board judged that a further easing of monetary policy was appropriate," it said in a statement.

"The board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply."

The third cut of 2025 sees the cash rate 75 basis points below its recent peak of 4.35%, at 3.60%.

The majority of economists and the market had tipped the RBA's monetary policy board would cut the cash rate this month, following the central bank's surprise hold in July and amid falling inflation and rising unemployment.

Annual trimmed inflation, the RBA's preferred measure, fell to a four year low of 2.7% in the June quarter – well within the RBA's 2% to 3% target band.

Meanwhile, the unemployment rate, which typically moves in an opposite direction to inflation, rose to 4.3% in June – marking its first increase since January.

Thrown into the mix is ongoing global uncertainty surrounding the now-imposed US trade tariffs, with the world's largest economy officially taxing Australian goods at a rate of 10%.

How much will I save on my home loan?

In dollar terms, a 25 basis point drop to the cash rate will translate to a variable rate mortgage holder saving around $95 a month on a $600,000 home loan.

That's assuming they have an average interest rate – 5.73% p.a. for owner-occupiers making principal and interest repayments on outstanding loans, as per RBA data.

Check how much your home loan repayments could decrease using our Mortgage Repayment Calculator

Major banks – and some non-bank home loans lenders – are generally quick to respond to cash rate cuts.

Mortgage holders can expect to see lenders announcing they will pass on all – or some – of the cut in the coming days.

Although not all lenders are as prompt in lowering borrowers' minimum repayments.

See when your lender passes on the July interest rate cut via our Current Interest Rates in Australia updated coverage.

So far, only one lender has failed to pass on an RBA rate cut this cycle.

Virgin Money was alone in quietly refusing to pass on savings borne from the February rate cut, though borrowers did benefit from the May cut.

What will the rate cut mean for home buyers?

For those looking to enter the housing market, a July interest rate cut can be a double-edged sword.

It may see more homebuyers qualifying for home loans and able to borrow larger sums, thereby potentially increasing activity in the housing market and driving up home prices.

REA Group senior economist Eleanor Creagh said the persistent undersupply of housing will likely continue to bolster prices, despite affordability constraints.

"With interest rates moving lower this year, momentum in the housing market has strengthened, marking a turnaround from the slower conditions observed in late 2024," she said.

"Renewed buyer sentiment, supported by earlier rate cuts and the prospect of further reductions, is underpinning this recovery."

However, Ms Creagh forecasts price growth will moderate compared to earlier rate cut cycles.

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