Interest rates in Australia are always a hot topic, and for good reason. They influence everything from borrowing power to property prices and even how much you’ll repay on your mortgage each month.
In a move that surprised many economists and market watchers, the Reserve Bank of Australia (RBA) has decided to hold the official cash rate at 3.85% during their July 2025 meeting.
But what does the state of interest rates look like for the rest of this year, and how can home loan holders and buyers plan for what’s ahead?
Will the RBA cut rates again in 2025?
After more than a year of rate hikes aimed at controlling inflation, inflation has begun to ease, unemployment is steady, and consumer spending has slowed, all of which supports the case for cash rate cuts.
Of the surprise July decision to hold the cash rate, and not make another much needed cut, Reserve Bank of Australia governor Michele Bullock said that while inflation for the March quarter was 2.4 per cent – within the RBA’s target range - the bank wants to see that it remains consistent.
The Australian Bureau of Statistics is preparing to release its June quarter inflation results on 30 July and the key figure to watch is a 2.6% annual inflation rate.
In her press conference, following the announcement, Ms Bullock did not rule out further cuts for homeowners stressing that the board still anticipates interest rates to fall.
According to economic outlooks from the big four banks, including Commonwealth Bank and Westpac, the RBA is expected to begin a gradual cutting cycle from mid to late 2025, with additional cuts likely into 2026 if inflation remains within the RBA's 2-3% target band.
While the board decision to hold rate cuts in July was disappointing to many mortgage holders, the board will meet again in August, September, November and December.
Source: rba.gov.au
Long-term interest rate projections
While no one has a crystal ball, here’s what leading economists and Australia’s big four banks are forecasting:
Year | RBA Cash Rate Forecast | Notes |
End of 2025 | 3.35%-3.85% | One or two cuts expected |
2026 | 3.10%-3.50% | Slow downward trend continues |
2027–2029 | 2.85%-3.25% | Rates settle at a new “neutral” baseline |
2030 | 2.50%-3.00% | Potential for stability if inflation stays low |
Source: rba.gov.au, kpmg.com, amp.com.au
Big four bank predictions for 2025:
CBA: 3.35% by end of 2025
Westpac: 3.35% by December 2025
NAB: Gradual cuts starting late 2025
ANZ: Cautious easing depending on inflation outlook
Sources: Aussie | What experts will predict will happen with interest rates in May 2025
These numbers suggest a slow, steady return to more typical rate settings, but not a return to pandemic-era lows. Before February 2025, there had been no rate cuts since July 2020 when the cash rate was when the rate was lowered to 0.10%.
Scenario planning: What should buyers, owners and investors do?
"While the goal posts are being moved, buyers can do so many things to take more control and avoid waiting longer than they need to while the market moves," says Alya Manji, an Aussie Broker.
Scenario 1: Two cuts in 2025, then a pause
What happens: | Interest rates drop slightly but remain relatively high. Property demand increases modestly. |
Smart move: | Consider locking in a competitive fixed rate or split loan structure now. If you’re close to buying, speak to a broker to secure pre-approval before increased demand lifts property prices. |
Scenario 2: Multiple cuts in 2025-2026
What happens: | More buyers flood into the market. Property prices accelerate. Refinancing activity surges. |
Smart move: | Use tools like Aussie's Borrowing Power Calculator and Live Equity Tracker to model your future position. Refinancers may benefit from switching early while competition between lenders heats up. |
Scenario 3: Rates stay higher for longer
What happens: | The RBA holds off on further cuts due to global uncertainty or sticky inflation. |
Smart move: | Waiting for the “right time” could cost more than you think. Consider whether buying now could still work for your long-term goals. Focus on affordability, buffers, and building equity gradually. |
The cost of waiting and why timing the market can backfire
According to new Aussie research, waiting for rates to drop before buying could cost Australians over $7.7 billion in lost equity and rising home prices.
"Many first home buyers, even mum and dad investors, that we speak to become fixated on holding out for the right price or waiting for more cuts, when in reality, the perfect time to buy at any time over the past 25 years was yesterday," says Ms. Manji.
Waiting for the perfect rate, time, or house costs first-home buyers as soaring property prices outpace potential savings from interest rate cuts. The data showed that the average "Waiting Tax" nationally is around $77,000 over the life of a loan.
“Buying as soon as you can, even if it’s not your dream first home, means paying a lower deposit, less in principal, and less interest overall,” Ms. Manji adds.
What are your options right now?
You don’t have to wait for the market to change. Here’s what you can do today to take more control:
If you're looking to buy:
Use Aussie's Borrowing Power Calculator to see what you can afford.
Explore low deposit options, including guarantor loans and LMI-backed loans.
Get a free^ appointment with an Aussie Broker to understand your full buying power.
"Most first home buyers are navigating the entire process independently, from searching online to attending open homes and bidding at auctions. A buyer's agent acts on your behalf and can help you secure the right home and save time on your search, which we know from the data is critical," says Ms. Manji.
If you own a home:
Check your home’s value with a free Aussie Property Report.
Use the Aussie App to explore your equity position.
Think about refinancing even a 0.25% drop could save you. Here’s a real-world comparison showing how refinancing a $650,000 variable home loan from 6.20% p.a. to 5.60% p.a. could save you over $100K and cut four years off your loan.^
Loan Scenario | Before Refinance | After Refinance (Same Monthly Payment) |
Loan Amount | $650,000 | $650,000 |
Loan Term | 30 years | 30 years |
Interest Rate | 6.20% p.a. | 5.60% p.a. (Variable) |
Monthly Repayment | $3,981 | $3,732 |
Monthly Saving | $0 | $249/month |
Extra Monthly Repayment | $0 | $249 (voluntary, to match previous repayment) |
Total Repayments | $1,438,956 | $1,236,753 |
Total Interest Paid | $789,280 | $586,753 |
Interest Saved | $0 | $106,592 |
Years to Pay Off | 30 years | 26 years |
Years Saved | $0 | 4 years |
If you're investing:
Talk to a an Aussie broker about unlocking equity to fund your next purchase.
Use property tools to assess rental yields, capital growth forecasts, and vacancy trends.
Consider buying before price growth outpaces the benefits of future rate cuts.
You might also be interested in: How to buy your first home with 5 percent deposit
A quick chat with an Aussie Broker can give you clarity on your options and confidence in your next steps. Whether you're buying, refinancing or investing, we’re here to help you take control.
^Repayment based on a $650,000 variable loan at 6.20% p.a. over 30 years. **Interest savings calculated using a comparison between 6.20% p.a. to 5.35% p.a. rates over the life of a 30-year variable loan with consistent repayments. Scenarios are for illustrative purposes only and may not apply to your situation. ***Not all lenders are available through all brokers.