Interest Rate Cuts: What They Could Mean for You

As we begin to see the calming effect of the most recent interest rate cut, it’s time to look ahead at what we might expect for the rest of 2025 and into 2026. So far, rates have dropped by 50 basis points—from 4.35% down to 3.85%—with CBA and ANZ both forecasting the cash rate to reach 3.35% by year’s end.

With the RBA meeting again in July, all eyes will be on the banks. If the RBA makes another cut, as many expect, we should see lenders pass it on in full. But the next one? That’s where I have doubts. Don’t be surprised if, following the August or September meeting, the big banks choose not to pass on the full cut. Instead, they may cite high funding costs and only shave 10 to 15 basis points off rates. It's a move we've seen before—and it won’t be the last. Over the past 10 years, the RBA has delivered 12 rate cuts, but only half were passed on in full by CBA, ANZ, and NAB. Westpac has done so just four times.

Whatever happens, interest rate cuts are good news for borrowers—especially property investors on variable rates. Lower rates can boost cash flow by reducing repayments, which makes holding onto investment properties a bit easier. They also increase borrowing capacity, opening the door to new opportunities in the market for those looking to expand their portfolio.

But let’s not get ahead of ourselves. The RBA is still cautious. The economy only grew by 0.2% in the first quarter of 2025, and inflation remains a delicate issue. One wrong move and we’re back to square one.

You’d think lower rates would send Aussies straight to the shops—but that’s not the case. Many households are still prioritising savings or paying down debt. For the retail sector, that means sluggish sales—even during end-of-financial-year promotions.

This has a knock-on effect across the economy. When spending drops, so does growth. The RBA is trying to walk a fine line—stimulate activity without reigniting inflation.

As for what’s next? The experts are split. Some predict gentle cuts continuing into early 2026—especially if inflation keeps cooling. Others are calling for caution, pointing to global uncertainty and the ripple effects from major overseas economies.

One thing’s for sure: we’re not heading back to 2% mortgage rates anytime soon. But that doesn’t mean there’s no opportunity. It just means being smart about your money, your repayments, and your long-term strategy.

At Urban Money, we keep a close eye on the big picture so you don’t have to. Whether you’re a first-home buyer, investor, or just trying to make sense of the rate rollercoaster, we’re here to help with clear, practical advice tailored to your needs.

Got questions about your current loan, or wondering if it’s time to refinance? Let’s chat. In today’s economy, having the right broker on your side makes all the difference.

Disclaimer:
The information in this email is general in nature and doesn’t take your personal circumstances into account. It’s not financial advice. Always consider your situation and speak with a qualified adviser before making decisions. Figures mentioned are current as of June 2025 and may change.

Toby Mahoney, Urban Money