PHOTO: Reserve Bank of Australia (RBA). FILE
In a move widely anticipated by economists and financial markets, the Reserve Bank of Australia (RBA) has reduced the official cash rate by 0.25 percentage points, bringing it down to 3.85% . This decision, announced today, marks the second rate cut in 2025, following a similar reduction in February.
🏠 Relief for Mortgage Holders
For homeowners, this rate cut translates to tangible savings. On a $750,000 mortgage, the reduction could lower monthly repayments by approximately $114 . Over a year, this amounts to about $1,200 in savings, providing much-needed financial relief amid rising living costs .
RBA governor Michele Bullock lower rates? Picture: Monique Harmer
📉 Economic Context and Rationale
The RBA’s decision comes as inflation continues to ease, with the Consumer Price Index (CPI) recording an annual increase of 2.4% in the March quarter . This marks a significant decline from the peak inflation rate of 7.8% in late 2022. The central bank aims to support economic growth while ensuring inflation remains within its target range.
🔮 Future Outlook
Looking ahead, financial institutions anticipate further rate cuts. ANZ Research predicts two additional 0.25% reductions in July and August, potentially bringing the cash rate down to 3.35% by the end of the year . However, the RBA is expected to proceed cautiously, balancing the need to stimulate the economy with the risk of reigniting inflation.
💡 Tips for Borrowers
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Review Loan Terms: With interest rates changing, it’s an opportune time to reassess your mortgage terms and consider refinancing options.
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Budget Wisely: Allocate the savings from reduced repayments towards other financial goals or emergency funds.
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Stay Informed: Keep abreast of RBA announcements and economic indicators to make timely financial decisions.
📌 Key Takeaways
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The RBA has cut the cash rate by 0.25%, now at 3.85%.
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Homeowners could save approximately $1,200 annually on mortgage repayments.
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Further rate cuts are anticipated, but the RBA will act prudently to maintain economic stability.