Just announced - RBA cuts the cash rate

Written by Dona Edwards (AR 1262208) authorised representative of Industry Fund Services Limited (AFSL 232514)

If you’re an Incolink member juggling a mortgage while working in the construction industry, you’re in for some good news. The Reserve Bank of Australia (RBA) has announced a rate cut – a move aimed at easing cost-of-living pressures. Let's break down what it means for your home loan, your repayments, and even the broader property market.

What’s happening with interest rates?

The Reserve Bank of Australia (RBA) has recently lowered the official cash rate from 3.85% to 3.60%. While this is partly because inflation is starting to ease, there are other reasons too. The economy has been growing slowly, people are spending less, and some workers are finding it harder to get enough hours or stable jobs. By cutting rates, the RBA hopes to make borrowing cheaper, boost confidence, and help families and businesses manage through these challenges. It’s a stronger move than many expected, showing the RBA is serious about supporting the economy.

The RBA uses interest rates to manage inflation, aiming to keep it within a 2–3% target band.

When inflation rises, rates usually go up to slow things down. When inflation falls or the economy weakens, rates are often cut to encourage spending and investment.

This latest cut is designed to do just that—stimulate the economy at a time when both inflation and growth are slowing. It also comes after a period of particularly high interest rates and rising living costs, so it may offer some welcome relief for households.

What should you do now?

For building and construction workers with a mortgage, this could mean some relief on your home loan repayments. For new borrowers looking to get a mortgage, it could help you buy a new home.

Have an existing mortgage? A change to repayment amount.

If you’ve got a fixed mortgage, this cut won’t have any impact on your loan repayment amount, because you’ve locked into a set interest rate for the agreed term of the loan.

If you’re on a variable loan, rate cuts generally flow on to becoming lower interest rates for borrowers. You’re likely to see a significant drop in your monthly repayments, depending on how much of the rate cut your lender passes on.

Lower cash rates are often used to stimulate economic activity. If the economy improves, banks might be more willing to lend more due to increased confidence in borrowers' ability to repay loans.

Banks generally will base their interest rates on their products in line with the RBA, but they don’t have to, and some haven’t in the past. Times are tough at the moment, so there would be a lot of pressure on those banks to help ease it slightly for customers.

Are you a “new borrower” or refinancing? A slight change to borrowing power.

• Lower interest rates: A cut in the cash rate usually leads to lower interest rates on loans and mortgages. This means borrowing becomes cheaper, which can increase your borrowing capacity.

• Increased borrowing capacity: With lower interest rates, your monthly repayments on a loan would be lower. This can make it easier for you to meet the bank's lending criteria, potentially allowing you to borrow more.

My repayments have reduced, should I pay the new, lower repayment?

If you can afford to keep paying at the higher amount, that will provide you with higher interest savings, meaning you’ll pay your mortgage off quicker than if you paid the reduced amount. But, times are tough and every dollar counts, so make sure you do what’s right for you in your situation.

What will this rate cut mean for my mortgage?

A recent money.com.au reported the basic average interest rate for home loans to be 6.00%. So, using that rate, let’s see what the rate cut could look like for a 25-year home loan term:

(Source: Average Mortgage Australia: Home Loan Statistics 2025)

What if it was a 30-year loan term?

What’s Next?

With a recent rate cut now in place, many are watching to see what the Reserve Bank of Australia (RBA) will do next. If inflation continues to ease and economic conditions remain soft, further rate cuts could be considered in the coming months.

For now, it’s a good time to review your finances and make the most of the lower interest rate—whether that means enjoying reduced repayments or using the savings to pay off your loan faster.

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Dona Edwards

Financial Adviser, IFS – Supporting Incolink Members

Issued by Industry Fund Services Limited (AFSL 232514) (IFS) | phone 1300 680 821.

Written by Dona Edwards (AR 1262208) | 1 Pelham Street, Carlton VIC 3053 | phone 0459 758 637. Dona is an authorised representative of IFS.

General advice only. Does not consider your personal circumstances. Consider if the advice is appropriate before acting on it and read the relevant product disclosure statement.

IFS and Incolink have entered into an agreement for IFS to provide financial advisory services to Incolink and its members.