Mortgage holders are set to receive potential relief from the Reserve Bank of Australia’s (RBA) forthcoming interest rate decision. Major banks including Westpac, Commonwealth Bank, and NAB expect a rate cut following the July meeting, while ANZ anticipates a reduction in August. If implemented, the cash rate may drop by 25 basis points to 3.60 per cent, a move that would be welcomed by homeowners who have faced financial pressure due to previous rate hikes.
According to Money.com.au, homeowners could see significant savings on their monthly mortgage repayments if the anticipated cut of 0.25 per cent proceeds. For instance, a borrower with a $600,000 mortgage could save around $90 monthly, bringing their total savings to $273 since the beginning of rate cuts. Similarly, those holding $700,000 and $800,000 loans would save approximately $106 and $120 respectively, while a $1 million mortgage holder could save $150 a month, resulting in total savings of $456.
These figures are calculated based on an average starting interest rate of 6.24 per cent, noted in February 2025, over a 25-year term. Money.com.au’s Mortgage Expert, Debbie Hays, suggests that if the July rate cut occurs, it may significantly impact borrowers’ finances. She remarked, “This third rate cut is seen as offering genuine relief to household budgets,” noting that many have suffered from rate hikes in the past two years and are eager to understand how lenders will respond.
This relief comes at a noteworthy time when many families are receiving tax returns, allowing any financial breather to be greatly appreciated. Hays also mentions that this cut could enhance borrowing capacity by as much as $50,000 for prospective buyers, depending on individual lenders. While this represents an opportunity for better home options, it may also intensify competition in the property market due to increased borrowing power and potentially drive property prices higher.
In summary, as the RBA’s interest rate decision approaches, the potential for reduced rates presents a significant opportunity for mortgage holders to alleviate some of the financial strain they have been under, benefitting both current homeowners and those looking to enter the real estate market.