RBA cuts official cash rate to 1.25%, but will lenders pass it on in full?

By Tom Watson · · 7 min read
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It’s been a long time coming, but the Reserve Bank Board has finally broken the interest rate deadlock by dropping the official cash rate to a new record low of 1.25% at this afternoon’s meeting in Sydney.

Rates had previously remained on hold at 1.50% for 30 consecutive meetings dating back to August 2016, but according to RBA Governor, Philip Lowe, weak inflation and employment figures finally forced their hand.

"The recent inflation outcomes have been lower than expected and suggest subdued inflationary pressures across much of the economy," he said.

"The central scenario remains for underlying inflation to be 1¾ per cent this year, 2 per cent in 2020 and a little higher after that."

"Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target."

RELATED: Here’s what you can expect if the RBA cuts interest rates

Only months ago the RBA was making noises indicating their preference for an interest rate rise, but changed their tune somewhat recent reports.

According to Mozo Product Data Manager, Peter Marshall, a number of deteriorating economic indicators ensured that a cut became inevitable.

“Ultimately, given the state of the economy, the housing market and the latest CPI figures, it was only a matter of time before the RBA hit the button and implemented the cut.”

Lacklustre economic conditions had many tipping May to be the month the RBA finally cut, but it looks like the board wanted the federal election out of the way before making any moves.

Will home loan lenders pass on the full RBA cut?  

Now that the RBA has cut rates, focus will likely shift to whether or not home loan lenders pass on the full 25 basis point cut to borrowers and, if they do, how long it will take. 

But if the last rate cut was anything to go by, mortgage holders won't have much reason to be optimistic. Following the rate cut of August 2016, the Big 4 banks only passed on only 12-14 basis points to their customers, letting them pocket an extra $3.6 billion in revenue.

We’ll be tracking all the latest variable home loan rate changes, so check in with our Naughty or Nice table below to see if your lender is playing fair.

Many lenders have already slashed fixed home loan rates in the lead up to the RBA’s decision, and according to Marshall, they will almost certainly pass a portion of the cut on across other loan types as well, but it’s more likely to be half rather than the whole thing.

“We could be surprised and see some banks pass on the full 25 basis point cut, but I think it’s more likely that they pass on around 12 or 15 basis points,” he said.

“As for when, we will almost certainly see announcements from a couple of banks within 24 hours, but any actual rate cuts may take a couple of weeks to trickle through.”

To find even more great rates, head on over to Mozo’s home loan comparison tables where you’ll be able to compare a range of variable rate and fixed rate home loans as well as great deals for investors and first home buyers.  

Read last month's Reserve Bank interest rates update.

Home loan comparisons on Mozo

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Last updated 27 July 2024 Important disclosures and comparison rate warning*

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    5.90 % p.a.
    Initial monthly repayment
    $2,995
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

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    6.16 % p.a.
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    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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    Initial monthly repayment
    $3,027
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    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

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    6.13 % p.a.
    Initial monthly repayment
    $3,027
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    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
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    6.34 % p.a.
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    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
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    Interest rate
    5.99 % p.a.
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    5.90 % p.a.
    Initial monthly repayment
    $2,995
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • OMG Home Loan

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    5.99 % p.a.
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    6.02 % p.a.
    Initial monthly repayment
    $2,995
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    BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.

  • Flex Home Loan

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    6.34 % p.a.
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    $2,995
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    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

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    $3,001
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    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

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    6.09 % p.a.
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    6.11 % p.a.
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    $3,027
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    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

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    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
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    Interest rate
    6.14 % p.a.
    Variable
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    6.16 % p.a.
    Initial monthly repayment
    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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    6.14 % p.a.
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    6.38 % p.a.
    Initial monthly repayment
    $3,043
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    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

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    6.39 % p.a.
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    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

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    6.42 % p.a.
    Initial monthly repayment
    $3,079
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  • Fixed Rate

    • Owner Occupier
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    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.