RBA to cut interest rates in July: What this means for Australian homeowners

Australia’s financial landscape is set for a shake-up as the Reserve Bank of Australia (RBA) is widely expected to cut the official cash rate by 25 basis points at its meeting on July 8, 2025. This move would bring the cash rate down to 3.60%, offering immediate relief to mortgage holders.

In a rare show of consensus, Westpac, Commonwealth Bank, and NAB have all publicly forecast a rate cut following the July RBA meeting. These predictions come on the back of softer-than-expected inflation data, with the latest Australian Bureau of Statistics figures showing annualised inflation at just 2.1%—comfortably within the RBA’s 2–3% target band.

• Westpac: Chief Economist Luci Ellis highlighted that the May CPI indicator “came in below even the low number that we expected,” prompting the bank to bring forward its rate cut forecast to July. Westpac now expects the cash rate to eventually fall to 2.85%, implying three further 25 basis point cuts after July.
  
• Commonwealth Bank: Economists expect two 25 basis point cuts this year—one in July and another in August—citing easing inflation and the RBA’s dovish tone. They predict the cash rate will reach 3.35% by the end of the cutting cycle.
  
• NAB: NAB’s economists also anticipate a July cut, followed by two more in August and November, bringing the rate to 3.10%.

ANZ, however, is holding on to its forecast for a cut in August, not July, making it the outlier among the big four. ANZ has described the rate cut path as the “path of least regret,” but is cautious about acting too soon, preferring to wait for further data before recommending a move.

What does a 25 basis point cut mean for homeowners?

If the RBA moves to slash rates tomorrow, the cash rate will drop from 3.85% to 3.60%. For a typical Australian mortgage of $600,000, this could mean a reduction in repayments of about $90 per month—assuming banks pass on the full cut to borrowers. This would bring their total monthly savings to $273 since rate cuts began earlier this year.

For larger mortgages, such as $1 million, the monthly savings could reach $150. These cumulative savings are providing crucial breathing room for households, especially after a prolonged period of high rates.

The impact of these cuts is more than just numbers: the share of mortgage holders considered ‘At Risk’ of mortgage stress is projected to fall from 26% to 24.7% after the July cut, equating to about 99,000 fewer households under financial pressure. Lower repayments will allow families to redirect funds to other essentials or build a financial buffer.