On May 20, 2025, the Reserve Bank of Australia (RBA) announced a 0.25% reduction in the official cash rate, lowering it from 4.10% to 3.85%, as eagle eyed borrowers took the small win to save on their home loan.
This move marks a shift in the RBA’s monetary policy, reflecting a more cautious approach amid global economic uncertainties and signs of easing domestic inflation. You can read the full statement from the RBA here.
The RBA’s decision was influenced by moderating core inflation, which stood at 2.9% in the first quarter, and growing concerns over global trade tensions. Economists anticipate that this cut could be the first of several, with two more rate reductions likely this year, potentially bringing the cash rate to 3.35% by year-end. However, that is all up for the usual debate and depends heavily on more border global events.
Following a rate cut, you’re probably expecting your mortgage repayments to go down. After all, a lower interest rate means a lower monthly cost… right?
Not always.
At Base Home Loans, we often hear from clients who are surprised to learn that their lender didn’t pass on the full rate cut — or didn’t reduce their repayments automatically. So let’s break down what actually happens after a rate cut, and what you can do if your loan hasn’t changed.
Will My Home Loan Repayments Automatically Decrease?
If your lender has passed on the full 0.25% rate cut, your variable-rate loan repayments may decrease — but only if your loan is set to adjust automatically. Many loans have a minimum repayment amount that stays the same unless you request a change. So, even if your interest rate drops, your monthly repayment might not reflect that reduction unless you take action.
If your loan is on a variable rate, there’s a good chance your lender might pass on all or part of the RBA rate cut. But here’s the thing: they’re not required to, and even if they do, your repayments might not change automatically.
Some lenders quietly pocket part of the rate cut. Others lower your interest rate but keep your repayment amount the same — meaning you’re just paying off your loan faster without seeing any difference in your monthly outgoings.
What Happens If My Rate Doesn’t Drop?
If your lender doesn’t pass on the cut, you’re effectively paying more than you should be and we need to talk about refinancing your home loan. But even if your rate does drop and your repayments stay the same, you could still benefit — you’ll simply be building equity faster and saving on interest in the long run.
So, the big question becomes: what’s more important to you right now?
Should You Lower Your Repayments or Pay Off Your Loan Faster?
If your lender doesn’t pass on the rate cut, your repayments remain unchanged, and you’re effectively paying more than necessary. However, if your rate does drop and your repayments stay the same, you’re paying off your loan faster, which can save you thousands in interest over time.
What Should You Do?
It depends on your financial goals:
- Need more cash flow each month? If you’re feeling the pinch with rising living costs and could use more breathing room each month, you’ll want your repayments to go down with the rate cut. Request your lender to pass on the rate cut and adjust your repayments accordingly.
- Want to pay off your loan faster? If you’re comfortable with your current repayments, keeping them the same while your interest rate drops means you’ll be chipping away at your loan faster — which can save you thousands over time. Keep your repayments the same and let the rate cut work in your favor.
Not Sure What to Do? We’ve Got Your Back.
This is where Base Home Loans comes in. As award-winning Perth mortgage brokers, we make it easy to understand what’s happening with your home loan — and help you take the next step with confidence.
We’ll:
✅ Check whether your lender passed on the rate cut
✅ Review your current interest rate and repayment structure
✅ Help adjust your repayments if needed
✅ Negotiate a better rate or switch lenders if you’re not getting a fair deal
Life’s Stressful Enough — Let’s Make This Simple
Whether you want lower monthly repayments, faster loan paydown, or just someone to explain it all in plain English, we’re here to help.
Get in touch with Base Home Loans today — and make sure your mortgage rate is working for you regardless of what the RBA is doing.
Because when rates drop, you shouldn’t be left wondering.
You should be saving — and we’ll make sure you are.
Ready to Take the Next Step?
📅 Book a Free Discovery Call via Calendly
📩 Contact Us here
📞 Or call Daniel now on 0422 271 888 — no waiting, no stress.
Life’s stressful enough. Let Base Home Loans make your mortgage easier.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute financial or professional advice. While we strive to provide accurate and up-to-date information, mortgage laws and regulations can change, and individual circumstances may vary. We recommend consulting with a qualified financial advisor or mortgage broker to assess your specific situation and needs. Base Home Loans is not responsible for any actions taken based on the content of this blog. Always conduct your own research and consider seeking professional advice before making financial decisions.
