Rate cut coming tomorrow, but will falls keep flowing?

The central bank's monetary policy board entered its May meeting on Monday morning, with its decision – largely expected to be a 25 basis point cut – to be announced at 2:30pm AEST Tuesday. 

That would bring the cash rate to 3.85% – down from the 4.35% peak held between November 2023 and February 2025.

Some forecasters, including those at NAB, are predicting the RBA to go even further, cutting by 50 basis points on Tuesday to 3.60%.

Looking beyond May, most economists expect at least one more cut in 2025.

What big banks expect next: One cut or a cutting cycle?

Early 2025 brought the first RBA rate cut of the current economic cycle, while May is expected to bring the second.

How much relief struggling mortgage holders might see afterwards depends on which big four bank you ask.

'Not much,' is the answer apparently given by those at ANZ.

The smallest of the quartet updated its RBA forecast on Friday, scrapping predictions of a July cut.

That leaves it expecting just one more 2025 cut after May – tipped to be passed down in August.

NAB economists' predictions lie in stark contrast.

It continues to forecast three 25 basis point cuts, with announcements in July, August, and November.

One more in February 2026 will leave the cash rate at 2.6%, according to the big bank's outlook.

In the middle are CommBank (where economists tip 25 basis point cuts in August and November) and Westpac (which forecasts a cut per quarter in the second half).

When will home loan repayments drop?

Homeowners will naturally want to know when their repayments will actually fall – and whether lenders will pass the cut on at all.

Assuming the central bank drops the cash rate as it's expected to, homeowners will still have at least a few weeks to wait before they realise savings – if they realise savings at all.

It's likely that some lenders would choose to pocket the cash rate cut instead of passing it onto borrowers.

Only one lender – Virgin Money – didn't pass on RBA's February cut, but the second cut of the cycle might see more on the sidelines, or not passing the full cut on.

Your Mortgage will be keeping a running tally of lenders' responses in the wake of a cut.

Lenders that do pass the cut onto borrowers, generally don't do so immediately (with the exception of Athena).

There's commonly 10 days to two weeks of leeway provided to mortgage holders, with savings not realised until their next home loan repayments – which might be six weeks from the date of the cut.

Importantly, borrowers need to be aware their repayments might not automatically reduce.

Some of the nation's largest lenders, including CommBank, ask those wishing to reduce their repayments in line with a new interest rate to specifically request the change.

CommBank data reveals that only 14% of eligible borrowers did so after the February cut.

Those that don't will effectively make extra repayments, which could help them repay their home loan faster.

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