RBA lowers the cash rate to 3.85% in May – which banks have passed on rate cuts to borrowers
The Reserve Bank of Australia (RBA) trimmed the cash rate for the second time in 2025 – down 25 basis points from 4.10% to 3.85%.
This marks the second rate cut this year, following the first in four years in mid-February, and reflects the central bank's response to easing inflation and global economic uncertainties.
What does this mean for borrowers?
Today’s decision means prospective buyers might begin comparing home loan options, while existing mortgage holders may be considering next steps to take advantage of rate cuts.
While the RBA has trimmed the cash rate, banks have no obligation to pass these cuts 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.
Which banks have passed on the rate cut to borrowers?
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 the specific date as to when the changes will take effect.
| Home Lender | Rate change | Effective date | Expected variable rates from (p.a.) | RBA Match |
|---|---|---|---|---|
| -0.25% | 30 May 2025 | 5.89% |
|
|
| -0.25% | 30 May 2025 | 5.59% |
|
|
| -0.25% | 30 May 2025 | 5.94% |
|
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| -0.25% | 3 Jun 2025 | 5.59% |
|
|
| -0.25% | 2 Jun 2025 | 5.74% |
|
|
| -0.25% | 30 May 2025 | 5.59% |
|
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| -0.25% | 20 May 2025 | 5.74% |
|
|
| -0.25% | 2 Jun 2025 | 5.63% |
|
|
| -0.25% | 3 Jun 2025 | 5.79% |
|
|
| -0.25% | 6 Jun 2025 | 5.63% |
|
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| -0.25% | 3 Jun 2025 | 5.79% |
|
|
| -0.25% | 30 May 2025 | 5.69% |
|
|
| -0.25% | 10 Jun 2025 | 5.49% |
|
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| -0.25% | 6 Jun 2025 | 5.64% |
|
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| -0.25% | 11 Jun 2025 | 5.49% |
|
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| -0.25% | 3 Jun 2025 | 5.59% |
|
|
| -0.25% | 30 May 2025 | 5.49% |
|
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| -0.25% | 30 May 2025 | 5.49% |
|
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| -0.25% | 2 Jun 2025 | 5.49% |
|
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| -0.25% | 30 May 2025 | 5.54% |
|
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| -0.25% | 3 Jun 2025 | 5.64% |
|
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| -0.25% | 3 Jun 2025 | 5.54% |
|
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| -0.25% | 23 May 2025 | 5.64% |
|
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| -0.25% | 30 May 2025 | 5.49% |
|
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| -0.25% | 5 Jun 2025 | 5.53% |
|
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| -0.25% | 10 Jun 2025 | 5.63% |
|
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| -0.25% | 30 May 2025 | 5.39% |
|
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| -0.25% | 4 Jun 2025 | 5.44% |
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| -0.25% | 3 Jun 2025 | 5.79% |
|
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| -0.25% | 30 May 2025 | 5.65% |
|
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| TBA | ||||
| -0.25% | 6 Jun 2025 | 5.54% |
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| -0.25% | 29 May 2025 | 5.59% |
|
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| -0.25% | 20 May 2025 | 5.49% |
|
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| -0.25% | 1 Jun 2025 | 5.5% |
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Why did the RBA cut?
May’s decision reflects that inflation is sustainably back within its 2-3 per cent target band.
The most recent quarterly CPI figures (see chart below) show annual inflation falling to 2.4 per cent – its lowest level since March 2021 – driven by declining goods prices and stabilising services inflation. Additionally, underlying inflation (trimmed mean) was 2.9 per cent in the March quarter, down from 3.3 per cent in the December quarter.
Annual GDP growth has slowed to 1.3 per cent, according to the latest national accounts, highlighting weaker economic momentum across both consumer and business sectors. While employment remains resilient – with the unemployment rate holding steady at 4.1 per cent in April – broader labour market slack is emerging as participation increases and job creation thins.
Retail turnover has also shown signs of stagnation, with minimal month-on-month growth in the early months of 2025. A 0.2 per cent increase in February followed a 0.3 per cent lift in January and a decline in December, signalling cautious consumer spending despite population growth.
Economists are divided over how many cuts may follow. Meanwhile, all of the Big Four banks are forecasting further cash rate reductions before the end of 2025.
Markets and banks accurately predict RBA rate call
In the lead-up to the May RBA meeting, all of the Big Four banks and the majority of market commentators widely anticipated that the central bank would cut rates.
When will the RBA cut rates again?
Following this latest cut, borrowers are still hoping for further relief, pondering if and 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.
In its statement on monetary policy , the RBA said it expects headline inflation to temporarily rise towards the top of its 2-3 per cent target band, while underlying inflation is forecast to stay around the midpoint of that range for most of the outlook period.
The RBA believes the adjustment will slightly ease the current monetary policy stance but remains wary of ongoing economic uncertainties.
"The Board considered a severe downside scenario and noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia," according to the RBA.
"While expectations may be that there'll be more cuts coming over the remainder of this year, I don’t think we can be too confident about the number and timing of any further cuts yet given the cautious approach that the RBA typically adopts.”
– Mozo banking expert Peter Marshall
Stay tuned to Mozo’s Live Blog and Interest Rate Tracker over the next few days for further analysis and to find out which providers pass on rate cuts – and which ones don’t.
Read last month's Reserve Bank interest rates update.
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