Sunita Somvanshi
The Reserve Bank of Australia (RBA) has cut its official cash rate to 3.85%, bringing welcome relief to millions of mortgage holders. This 0.25% reduction marks the second cut for 2025, prompting major banks to follow suit with their own rate reductions.
CommBank has taken the lead in the investor home loan market, cutting its variable rates for investors even further to 5.69%. These additional cuts of between 0.07 and 0.12 percentage points apply to the bank’s digital-only investor home loans but are only available to new customers.
“This cut is good news for new borrowers, but existing CBA investors might be frustrated to see better deals going to new business while they continue to pay more,” said Canstar data insights director Sally Tindall.
Among the major banks, Westpac and ANZ now offer their lowest investor variable rates at 5.84% and 5.89% respectively. NAB remains the only big four bank with investor variable rates above 6%, though NAB-backed UBank offers rates as low as 5.74%.
The RBA’s decision to cut rates stems from a softening inflation outlook and concerns about global economic uncertainties. With headline inflation at 2.4% and the RBA’s preferred trimmed mean inflation at 2.9% for the March quarter 2025, both figures now fall within the RBA’s 2-3% target band.
RBA Governor Michele Bullock has emphasized the “cautious” nature of the rate cut, noting that the Board had even considered a larger 0.50% reduction. This signals the central bank’s responsiveness to economic data while maintaining vigilance against inflation.
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While the big four banks have passed on the full rate cut to variable home loan customers, a lesser-known banking practice is preventing some borrowers from seeing immediate benefits. CommBank, NAB, and ANZ are not automatically reducing monthly direct debits for variable-rate home loan customers, even after passing on the rate cuts.
This means borrowers must manually contact their lender or adjust repayments online to see any savings. According to Mozo personal finance expert Rachel Wastell, it’s a classic case of “don’t ask, don’t get.”
“Most people assume a rate cut means they’ll pay less, but unless they log into their banking app or call their lender, that repayment could stay exactly the same,” Wastell explained.
However, this “sneaky bank trick” can have an upside. NAB reported that over 95% of its customers chose to maintain their higher repayment amounts after the previous rate cut. By keeping repayments higher than the new minimum, borrowers effectively pay down their principal faster, potentially saving significant interest over the life of the loan.
Looking ahead, most economists predict further easing, with Westpac Economics forecasting additional 0.25% rate cuts in August and November 2025. Market expectations suggest another cut is likely at the RBA’s July meeting, less than four weeks away.
For borrowers seeking immediate relief, it’s worth contacting lenders directly about reducing repayments. Otherwise, the intended cash flow benefits of the RBA’s cut may not materialize for households feeling the pinch from cost-of-living pressures.
