What do the RBA’s rate cuts mean for you?

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Team MONEYME|13 March 2025| 3-minute read

For anyone with a mortgage, the last few years have been tough. 

Between May 2022 and November 2023, the Reserve Bank of Australia (RBA) increased the cash rate 13 times – from 0.10% to 4.35%. 

It remained there for over a year, until, in February, the RBA cut the cash rate by 0.25%, to 4.10%. 

This was the first cut since 2020, and has come as a great relief to borrowers all over Australia. 

Here, we look at what the rate cut is all about, why the RBA did it – and what it might mean for you.

What is the RBA’s cash rate cut all about?

First things first: what is the cash rate? 

The cash rate is an interest rate set by the RBA, which determines how much interest banks must pay when they borrow money from other banks overnight. 

When the cash rate rises or falls, other interest rates usually rise or fall with it. These may include interest rates on mortgages, personal loans, credit card debts and savings accounts.

Why and how did the RBA cut the cash rate? 

The cash rate is a monetary policy measure used by central banks to manage the economy. The RBA increased the cash rate over the past couple of years to help stifle raging inflation. In 2022, inflation reached its highest point in Australia since the 90s, peaking at 7.8%.  

Inflation is when the prices of goods and services increase. Low inflation (around 2 to 3 percent per year) is healthy for the economy, because it indicates growth. 

However, high inflation can cause people to struggle to meet living costs, leading to financial stress. High inflation usually occurs when unemployment is low and wages are high, leading to greater demand for goods and services.    

By increasing the cash rate, the RBA hoped to reduce this demand. The more people are obliged to pay for their mortgages and loans, the less money they have to spend. 

The main reason the RBA cut the cash rate in February is that inflation had slowed. In the last quarter of 2024, it fell to 2.4% – the lowest rate since the first quarter of 2021. 

Consequently, the RBA doesn’t have the same need to decrease spending to bring down inflation and decided to decrease the cash rate.  

What does the rate cut mean for you?

While there is no requirement on banks to pass on cash rate cuts to customers, the RBA’s rate decrease is likely to bring down the interest rate on  mortgages and other types of loans over time. 

For borrowers, this could be great news. You can now take a bit of a breather, knowing that your monthly repayments are less likely to keep jumping up, and may even come down.

But a cash rate reduction affects more than just borrowing costs. It can also lower savings account interest rates and weaken the currency, making overseas travel more expensive.

A changing cash rate could be a good time to make some smart money moves.

Whether you’re thinking about consolidating your debts or refinancing to save money or taking out a personal loan to achieve a long-awaited goal, the RBA’s rate cut could bring you one step closer to making a change, as you might be able to borrow for less. 

If you currently have a higher interest loan, you could save on interest by refinancing it to a new loan at a lower rate.

To see what rate and repayments you could be eligible for now, get an obligation-free quote online from MONEYME in minutes without impacting your credit score.

Consolidate your debt and save

By consolidating multiple debts like high interest loans and credit cards into one low rate loan, you could get a lower interest rate, reduce monthly repayments and save on overall fees/charges.

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