Current Interest rates in Australia

What is the RBA cash rate?

The Reserve Bank of Australia’s (RBA’s) overnight cash rate target (often simply called the cash rate) influences many things. Though, home loan holders are likely most concerned with how it impacts interest rates.

The RBA cash rate determines how much lenders need to pay to borrow money. The higher the cash rate, the more expensive it is for a bank to operate day-to-day.

Therefore, when the cash rate is high, so to will be the interest rates that banks and lenders charge to borrowers and provide to depositors. After all, banks and lenders want to protect their bottom line, just like the rest of us.

As of 8 July, the cash rate is 3.85% with the RBA choosing not to deliver back-to-back rate cuts following the May cut. The cash rate was at its recent high of 4.35% to start the year.

The below chart shows how the cash rate has moved in recent times:

Why do we need a cash rate?

The cash rate serves as a crucial tool in managing the economy.

By adjusting the cash rate, the RBA can influence economic activity, control inflation, and ensure financial stability.

When the economy is overheating and inflation – that is, the price of goods and services – is rising too quickly, the RBA might increase the cash rate to make borrowing more expensive. That, in turn, can be expected to cool down spending and investment.

On the other hand, when the economy is sluggish and growth is subdued, a lower cash rate can stimulate it by making borrowing cheaper and encouraging spending.

Essentially, the cash rate acts as a lever to balance economic growth and maintain a healthy financial system.

However, the cash rate is not without its faults. It is often described as a 'blunt tool' because changes to the rate ripple across the entire economy, impacting far more than just the intended targets.

Why does the RBA cash rate impact home loan interest rates?

To explain how the RBA cash rate influences home loan interest rates, we need to start with how banks manage their money.

Regulations demand that banks maintain a certain level of liquidity at the end of each day. This means they must have a certain amount of cash on hand.

Cash deposits – such as those in savings accounts and term deposits – count towards a bank’s liquidity, while funds lent to borrowers reduce its liquidity.

If a bank disburses more funds through loans and deposit withdrawals within a single day than it receives in new deposits and loan repayments, it might struggle to meet its liquidity requirements.

That’s when the cash rate comes in. A bank can choose to borrow the necessary funds overnight to meet its liquidity needs, and it will be charged the overnight cash rate set by the RBA.

For that reason, when the cash rate is high, so is the cost of doing business for banks. When the cost of doing business is high, banks increase interest rates charged to borrowers to recoup their higher costs.

However, the cash rate isn’t the only factor that impacts home loan interest rates. Sometimes, lenders will adjust their home loan interest rates even if there has been no change in the cash rate. These ‘out of cycle’ home loan rate changes happen frequently.

Last cash rate cut: 25bp in May

With the RBA deciding to hold the cash rate steady at its July meeting, the last rate cut in May was the second cut of the the 2025 easing cycle.

The RBA board announced a 25 basis point cut on Tuesday 20 May, bringing the cash rate to 3.85%.

"Data on inflation for the March quarter provided further evidence that inflation continues to ease," its post-meeting statement read.

"With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate."

Although economists and markets had widely forecast a cut to the cash rate in July, the RBA's monetary policy board decided otherwise.

Other lenders

Fastest mover: Athena Home Loans

Athena was by far the first to implement the February rate cut - moving within hours of the RBA's decision.

Held Back: None

None of the lenders in our review did not pass on the May rate cut.

Was your bank slow to pass on the cut? If so, it could be a sign that it might be time to refinance. Check out these top rates available now:

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Lender	Home Loan	Interest Rate	Comparison Rate*	Monthly Repayment	Repayment type	Rate Type	Offset	Redraw	Ongoing Fees	Upfront Fees	Max LVR	Lump Sum Repayment	Extra Repayments	Split Loan Option	Tags	Features	Link	Compare	Promoted Product	Disclosure
loans.com.au	loans.com.au Variable Home Loan P&I <90%	5.29% p.a.	5.33% p.a.	$2,773	Principal & Interest	Variable			$0	$530	90%				Owner Occupier Variable Principal & Interest 10% Min Deposit Redraw Extra Repayments More details	Available for purchase or refinance, min 10% deposit needed to qualify. No application, ongoing monthly or annual fees. Dedicated loan specialist throughout the loan application.	More details	Compare	Promoted	Disclosure
Unloan	Unloan Variable Rate Home Loan LVR < 80%	5.24% p.a.	5.15% p.a.	$2,758	Principal & Interest	Variable			$0	$0	80%				Built and funded by CommBank Owner Occupier Variable Principal & Interest 20% Min Deposit Redraw More details	A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.	More details	Compare		Disclosure
loans.com.au	loans.com.au Variable Home Loan with Offset P&I <90%	5.39% p.a.	5.43% p.a.	$2,805	Principal & Interest	Variable			$0	$530	90%				Owner Occupier Variable Principal & Interest 10% Min Deposit Offset Redraw Extra Repayments More details	Available for purchase or refinance, min 10% deposit needed to qualify. No application, ongoing monthly or annual fees. Quick and easy online application process.	More details	Compare	Promoted	Disclosure

Cash rate tracker: What's next for the RBA?

While economists and commentators had widely tipped a cut to the cash rate at the RBA's last meeting on 7-8 July, the rate remained unchanged at 3.85%.

The hold decision of the RBA's monetary policy board was carried 6-3. The July meeting was the first time voting numbers have been released to the public, although they remain anonymous.

Prior to the July meeting, all four of the big bank economists had forecast a cut to the cash rate. It's now widely expected the next cash rate cut will come at the board's next meeting, scheduled for 11-12 August.

Outcome of RBA meetings in 2025:

Current Home Loan Rates