Mortgage rate cuts accelerate as lenders respond to RBA move

Australian lenders are rapidly cutting mortgage rates in response to the Reserve Bank’s recent cash rate reductions and expectations of further easing through late 2025.

Australian lenders are continuing to slash mortgage rates in response to the Reserve Bank of Australia’s (RBA) May rate cut, with 40 lenders cutting a combined 369 owner occupier and investor variable rates over the past week, according to Canstar’s latest Weekly Rate Wrap-up.

The average cut across these variable rates was 0.26%, while 20 lenders also trimmed 267 fixed rates by a more substantial 0.48% on average. In contrast, just four lenders increased 13 fixed rates by an average of 0.17%.

The result? A sharp increase in competitive offerings for borrowers. Canstar now lists 1,581 rates below 5.75%, up from 1,296 the previous week.

“The majority of lenders on Canstar’s database have now reduced their variable rates following the RBA’s cash rate cut in May, with just a handful still to move, although most are likely to do so in the next week or so,” said Sally Tindall (pictured), Canstar insights director.

To compare the latest figures with the previous week’s, follow this link.

Competitive rates from smaller lenders

The average variable rate for owner occupiers paying principal and interest now sits at 6.26%, but significantly lower rates are available – particularly from smaller institutions.

The lowest variable rate in Canstar’s database is 5.24%, offered by Horizon Bank as a first home buyer loan (excluding introductory and eco rates). For refinancers, Pacific Mortgage Group leads with a 5.34% variable rate.

“There are now over 30 lenders offering at least one advertised variable rate under 5.50 per cent with a mixed bag of loans that offers something for almost every borrower, provided you’re an owner-occupier and don’t want a big four bank,” Tindall said.

Savers miss out as rate cuts loom

While mortgage holders benefit, savers are facing diminishing returns. Tindall noted only six banks still offer ongoing savings rates of 5% or more, and these may not last long.

“There is a strong sense these will be short-lived, with the RBA leaving the door open to future cuts,” she said.

The minutes from the RBA board’s most recent meeting indicated a cautious approach to international volatility, but a willingness to act if needed.

“The board minutes confirmed the central bank is taking a considered view to the global ups and downs, but that it remains ready to act should it need to,” Tindall said.

“Certainly, further recent volatility overseas will continue to keep the RBA on edge. Add in the significant economic slowdown confirmed by the National Accounts data last week and the door is open to another cash rate cut, potentially as soon as at the next monetary policy meeting on the 7th and 8th of July.”