RBA Cuts Interest Rates: Who Wins and Who Loses?

The Reserve Bank of Australia (RBA) has announced a 0.25% cut to the cash rate, bringing it down to 4.1%. This decision, which ends a cycle of 13 consecutive rate hikes since mid-2022, was widely expected due to falling inflation and a slowing economy.

While the rate cut will bring relief to many, it also presents challenges for certain groups.

Winners

Homeowners

With banks expected to pass on the rate cut, many homeowners will see savings of around $100 per month on their mortgage repayments. In high-debt areas, the savings could be even greater.

Research suggests that mortgage repayments could drop by anywhere from $30 to $590 a month across hundreds of suburbs. In some Brisbane suburbs, homeowners could save up to $400 per month, while Sydney homeowners could see an average reduction of nearly $200 per month.

The rate cut could also help reverse the housing market slowdown in major capitals.

Renters

An increase in investment activity is already helping to boost rental supply, easing pressure on tenants. Better returns for landlords could also reduce the need for rent hikes.

The rate cut could help slow the pace of rental increases, providing relief to tenants.

Home Builders

Rate cuts typically improve profit margins for home builders, making it easier to kick-start new projects. This is critical for meeting the government's housing targets and addressing supply shortages.

Downsizers

Rising competition in the property market could work in favour of homeowners looking to sell larger homes and downsize. Higher demand could result in better sale prices while allowing downsizers to purchase a more affordable property.

Responsible Mortgage Holders

Borrowers who maintain their current repayment levels despite the rate cut stand to save significantly on interest over the life of their loan.

A borrower with a $600,000 loan could save up to $89,143 in interest and pay off their mortgage four years earlier if they continue making the same repayments.

A recent study found that 68% of mortgage holders plan to keep their repayment amounts unchanged, using the extra funds to pay down principal or deposit into an offset account.

Losers

First-Home Buyers

While lower rates improve borrowing power, they also drive up competition—especially in the more affordable price brackets where first-home buyers typically shop.

Many investors and upgraders have been waiting for a rate cut, potentially pricing out first-home buyers. While a buyer with a $600,000 budget may be able to borrow $10,000–$20,000 more, rising property prices could outpace this increase.

Savers

Lower interest rates often mean banks will reduce rates on savings accounts. This is particularly bad news for retirees and others relying on interest income from their savings.

Complacent Homeowners

Not all banks will pass on the rate cut automatically. Homeowners should monitor their lenders closely and consider refinancing if their bank doesn’t reduce rates.

There aren’t any rules that force banks to pass on rate cuts, so homeowners need to stay proactive. A better deal could save hundreds or even thousands over the course of a year.

Paulette Contessi 

Director / Licensee

CONTESSI PROPERTIES