RBA delivers first rate cut in four years, lowering the cash rate to 4.10%

The Reserve Bank of Australia (RBA) announced its first rate cut in four years, reducing the cash rate to 4.10% at its February meeting. This move comes on the back of easing inflation, prompting the central bank to shift its approach and offer some relief to borrowers.

This monetary policy decision marks the first reduction in the cash rate since November 2020. Between May 2022 and November 2023, the RBA embarked on a series of aggressive rate hikes in response to soaring post-pandemic inflation.

The decision to cut the cash rate comes as inflation has cooled from its peak in 2022. The latest ABS data shows annual headline inflation slowing to a pace of 2.4%, while core inflation finished at 3.2% in the December 2024 quarter, falling just shy of the RBA’s target range of 2-3%.

"Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. In the December quarter underlying inflation was 3.2 per cent, which suggests inflationary pressures are easing a little more quickly than expected," according to the RBA's latest statement on monetary policy.

"There has also been continued subdued growth in private demand and wage pressures have eased. These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range."

Despite this, underlying inflationary pressures remain, especially in areas like housing and services, which have continued to exert upward pressure on prices. 

With prices in check and the economy showing signs of slowing, the RBA opted for a cautious cash rate cut of 25 basis points, in an effort to support economic growth without triggering inflationary risks.

In the lead-up to the February RBA meeting, all of the Big Four banks and the majority of market commentators widely anticipated that the central bank would cut the cash rate at the next meeting. 

However, Mozo examined five charts to understand the cash rate outlook, suggesting underlying inflationary pressures, a resilient labour market and ongoing domestic and international economic uncertainty pointed to a cautious approach from the RBA. 

Although the RBA trimmed the cash rate this month, the data still indicates that the central bank might want to wait for clearer signs and fresh data that both headline and core inflation will remain sustainably within target range before making further reductions in 2025.

While today’s rate cut offers some relief, the big question remains: when will the RBA move again? The central bank has signalled that future decisions will depend on incoming economic data, particularly inflation, wages, and employment figures.

Although inflation has eased, underlying price pressures in housing and services remain a concern. The RBA will likely take a measured approach, ensuring inflation stays within the target range before committing to further cuts.

Market economists are split on the timing of the next rate move. Some predict another cut as early as mid-2025 if economic conditions soften, while others suggest the RBA may wait until late 2025 or even 2026 to avoid stoking inflationary risks.

For borrowers and businesses, this means ongoing uncertainty. Home loan rates had already started shifting prior to today’s decision, with some lenders cutting fixed rates in anticipation of a cut. However, variable rate mortgage holders may need to wait longer for additional relief.

All eyes will be on the upcoming RBA meetings and key economic releases in the months ahead, as policymakers weigh the balance between growth and inflation.

For a deeper dive into what’s influencing the RBA’s next steps, check out our latest economic analysis and stay tuned for the next update in the coming weeks. You can also read Mozo’s news archive for relevant information and follow our live interest rates blog.

Today’s decision means many prospective buyers shall begin comparing home loan options, while existing mortgage holders will be considering next steps to take advantage of rate cuts.

Mozo’s latest survey research shows that half of Australian mortgage holders are either considering or planning to refinance, now that the Reserve Bank has made its first cut of 2025.

“This rate cut is the first rate move in over a year, and the first cut since 2020, and it comes at a crucial time – when many Australian homeowners are feeling the compound pressure of thirteen rate hikes,” says Rachel Wastell, Mozo Money Expert. 

“While some borrowers are ready to act, others are choosing to stay put, possibly waiting for more clarity on future rate movements – but whether you’re looking to refinance now or down the track, it’s crucial to shop around, compare rates, and check if your bank is passing on this RBA cut in full.”

This is an important point: although the RBA has trimmed 25 basis points off the cash rate, not all banks will pass the full cut on to borrowers. Additionally, it can take several months for the effects of a rate cut to be fully felt. Banks tend to prioritise new customers and refinancers over existing mortgage holders, meaning it pays to be proactive. 

Homeowners facing costly mortgage repayments may want to consider their options. Switching to a lower-rate loan, refinancing with a different lender, or exploring fixed-rate options could help reduce repayments. For home loan rates, fees, and features, visit Mozo’s home loan comparison page and seek out the best deal to suit your financial circumstances.

When the RBA cuts the official cash rate, lenders can choose whether to pass the savings on to variable rate home loan customers. Some banks reduce rates in full, while others make partial cuts or delay changes. The table below tracks which lenders have adjusted their variable home loan rates, how much they’ve cut, and when the changes take effect.

Mozo RBA Rate Match Table