How the RBA cash rate connects to your mortgage
The Reserve Bank of Australia sets the cash rate — the interest rate at which banks borrow money overnight from each other. When the RBA cuts this rate, it reduces the cost of funds for lenders. In theory, lenders pass this reduction on to borrowers. In practice, it is more complicated.
Australian lenders are not required by law to pass on the full RBA cut, or to pass it on at all. Their decision depends on competitive pressure, their own funding costs, profit margin targets, and how aggressively they want to attract new business. What typically happens:
Day 0 — RBA announces rate decision at 2:30pm AEST
The Board releases its decision and a brief statement. Rate change (if any) takes effect the following day for overnight lending between banks.
Days 1–3 — Major banks announce their response
The big four (CBA, Westpac, ANZ, NAB) typically announce within 24–48 hours. Their pass-through rate and effective date varies — sometimes the full cut, sometimes less, effective immediately or in 2–4 weeks.
Days 3–14 — Other lenders follow
Non-bank lenders, credit unions, and second-tier banks announce their changes. Competition drives most lenders to pass on at least the majority of the cut within 2 weeks.
Weeks 2–4 — New rates take effect on your loan
Your actual repayment changes on your next scheduled payment date after the new rate takes effect. Your lender should notify you in writing.
The loyalty gap: why existing borrowers miss out
Here is what most borrowers do not fully understand: even when lenders pass on an RBA cut, they frequently offer sharper rates to new customers than to existing ones. A lender might cut their standard variable rate by 0.25% while simultaneously offering new refinancing customers a rate 0.5–0.8% below their existing customer base rate.
The loyalty tax in numbers: A 2023 ACCC report found Australian borrowers on existing loans paid on average 0.58% more than new customers at the same lender. On a $700,000 loan, that is $338/month — $4,056/year — paid purely for the privilege of staying put.
This gap tends to widen over time. Each rate cycle — cuts followed by rises followed by cuts — creates a new cohort of discounted new customers while the existing base gradually falls further behind. The only effective remedy is to refinance or negotiate aggressively.
How much does each RBA cut actually save?
Assuming your lender passes on a 0.25% cut in full:
| Loan Balance | Monthly Saving (0.25% cut) | Annual Saving |
|---|---|---|
| $400,000 | ~$83 | ~$996 |
| $600,000 | ~$125 | ~$1,500 |
| $800,000 | ~$167 | ~$2,004 |
| $1,000,000 | ~$208 | ~$2,496 |
| $1,500,000 | ~$312 | ~$3,744 |
Based on P&I repayments, 25-year term. Actual figures vary by remaining term and loan structure.
These savings assume the full cut is passed on. If your lender only passes on 0.15% of a 0.25% cut, scale accordingly. And remember — the savings from refinancing to a lender offering new-customer rates are typically 3–4 times larger than the saving from a single RBA cut passed through to an existing loan.
Fixed rate borrowers: RBA cuts don't help you directly
If you are on a fixed rate loan, RBA decisions do not affect your repayments until your fixed term expires. This is the fundamental trade-off of fixing: certainty in exchange for missing rate cuts (and protection against rate rises).
Fixed rate borrowers should note their revert date carefully. When your fixed term ends, your loan moves to the lender's standard variable rate — which is almost always higher than the best available market rate. Contact your broker 90 days before expiry to begin comparing options.
2025 RBA meeting schedule
The RBA meets 8 times per year. Rate decisions are announced at 2:30pm AEST on meeting days. For 2025:
2025 RBA meeting dates
Sign up for our RBA rate alert email to get same-day analysis of every decision and what it means for your mortgage.
What to do after an RBA rate cut
- Check what your lender actually passes on — not the headline RBA cut. Your lender's announcement (usually within 48 hours) tells you your actual rate change.
- Compare the new rate against current market — even after the cut, are you still paying a loyalty premium? Use our savings calculator to check.
- If the gap is 0.5%+, contact a broker — the rate cut may have narrowed the gap slightly, but if you are still significantly above market, refinancing is likely worth it.
- If you are on a fixed rate — note the remaining term. If you are within 6 months of expiry, start comparing now to avoid the revert rate trap.
The bottom line: An RBA rate cut is good news but not a substitute for actively managing your mortgage. The average Australian borrower pays $4,000+ per year more than they need to because they assume their lender is giving them the best available rate. They are almost never right.