Understand the Latest Interest Rate Update in Australia

Keeping up with interest rates doesn’t have to be complicated – we’ll simplify for you.

The Reserve Bank of Australia (RBA) has lowered the cash rate from 4.35% to 4.10% in February 2025. This figure plays a major role in shaping home loan interest rates, which can significantly impact your mortgage repayments over time.

At Freedom Loans, we know that understanding interest rates and home loans can feel daunting. That’s why we focus on providing clear, straightforward guidance. Want to know how the RBA’s cash rate affects your mortgage? Curious about the latest home loan interest rate update in Australia or which lenders are offering competitive deals? We’re here to help. 

With practical tips and tailored strategies, we empower you to make informed choices that align with your financial goals. Our goal isn’t just to explain the numbers – it’s to give you peace of mind and a plan that works for you.

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What Is the Cash Rate?

Many people probably don’t think about the cash rate until it starts to affect their mortgage. But here’s the thing – it’s a key player in how much your home loan costs.

The cash rate, set by the RBA, is the interest rate banks charge each other for short-term loans to balance their cash flow. This rate flows through to all kinds of interest rates – home loans, personal loans, and even savings accounts.

When inflation rises, the RBA might raise the cash rate to slow things down. On the flip side, if the economy needs a boost, they’ll lower it to encourage borrowing and spending.

How Does the Cash Rate Impact Home Loans?

Think of the cash rate as a domino. When it moves, so do home loan interest rates. A lower cash rate means lenders often reduce their rates, making home loans more affordable. But when the cash rate rises, your monthly repayments can, too. Even small changes can have a big impact over the life of your home loan.

What Are the Current Mortgage Rates?

While the RBA’s cash rate serves as a guide, your actual mortgage rate depends on a few key factors. Things like whether your loan is fixed or variable, the length of your loan term, and your loan-to-value ratio (LVR) all play a role in what rate you’ll be offered.

Fixed Rates

If you prefer certainty, a fixed rate might be the way to go. You lock in a rate for one to five years, giving you predictable repayments. For example, currently, you may be able to get a two-year fixed-rate owner-occupier home loan at an interest rate of about 6.03%. Short-term fixed rates tend to be lower, but longer terms can protect you from future rate hikes.

Variable Rates

On the other hand, variable rates move with the cash rate, which means they can go up or down depending on RBA decisions. Right now, variable interest rates for owner-occupiers paying principal and interest average around 6.71%. While variable rates give you flexibility, it’s worth keeping in mind that they can rise unexpectedly.

Rate Differences for Investors and Owner-Occupiers

If you’re buying an investment property, you might notice that rates are slightly higher than for owner-occupiers. That’s because lenders view investment loans as higher risk. 

Still, whether you’re an investor or a homeowner, there’s no one-size-fits-all solution. Comparing fixed and variable options is key to finding a competitive deal that works for you. 

Which Lenders Offer Home Loans in Australia?

Navigating the home loan market can feel overwhelming, but knowing where to look is half the battle. Australia has a wide range of home loan providers, including the Big Four banks, other major banks, customer-owned banks, digital lenders, and non-bank financial institutions. Each lender offers unique products and features designed to suit different borrower needs – whether you’re a first-home buyer, an investor, or someone with complex financial circumstances. Below, we list several lenders, along with the links to their interest rate update today, to help you find the right lender for your situation.

The Big Four 

Australia’s Big Four banks are the major players in the home loan market. They offer well-established services, a vast array of loan options, and competitive interest rates.

• Australia and New Zealand Banking Group (ANZ): ANZ offers home loans with flexible repayment options and digital tools to help borrowers easily manage their loans.
• Commonwealth Bank of Australia (CBA or CommBank): The largest bank in Australia, Commonwealth Bank provides a diverse range of home loan products and personalised support for borrowers.
• National Australia Bank (NAB): NAB is known for offering flexible fixed and variable-rate options, along with tools to simplify mortgage management.
• Westpac Banking Corporation: With features like split loans and offset accounts, Westpac caters to a variety of borrowers, including first-home buyers and investors.

Other Major Banks

These banks, while not part of the Big Four, are well-established in Australia and offer a range of financial products, including home loans.

• AMP Bank: AMP Bank provides home loans with competitive interest rates and flexible features to meet different financial needs.
• Bank of Queensland (BOQ): BOQ is known for its tailored banking services and adaptable home loan options.
• BankSA: BankSA provides tailored home loan solutions for borrowers in South Australia.
• Bankwest: As part of Commonwealth Bank, Bankwest offers a wide range of home loan products, especially for customers in Western Australia.
• Bendigo and Adelaide Bank: This community-focused bank offers competitive home loan options while supporting local initiatives.
• Internationale Nederlanden Groep (ING): ING specialises in online banking and provides home loans with a simple and straightforward application process.
• Macquarie Bank: Macquarie Bank is known for offering flexible mortgage options, particularly for investors.
• St.George Bank: A subsidiary of Westpac, St.George Bank provides home loans with various customisable features for different borrower profiles.
• Suncorp Bank: Suncorp Bank offers comprehensive home loan products with a strong focus on servicing Queensland customers.
• Virgin Money: Virgin Money provides home loans that combine digital convenience with competitive interest rates.

Customer-Owned Banks (Credit Unions)

Unlike traditional banks, these institutions are owned by their customers. They offer home loans with competitive interest rates and flexible repayment options. Also, they often use their profits to support community initiatives and improve services for their members.

• Auswide Bank: Auswide Bank delivers a range of home loan products while maintaining a community-first approach.
• Heritage and People’s Choice: This recent merger provides a wide variety of home loan solutions with member benefits.
• Newcastle Permanent: Newcastle Permanent focuses on offering competitive home loan options to borrowers in Newcastle and surrounding areas.

Specialised Customer-Owned Banks

These banks provide tailored financial services to specific professions or communities.

• Australian Military Bank: Australian Military Bank offers financial products, including home loans, specifically designed for Australian Defence Force personnel.
• Firefighters Mutual Bank: Firefighters Mutual Bank provides home loan solutions and financial services for firefighters.
• P&N Bank: Originally serving police officers and nurses, P&N Bank is Western Australia’s largest locally owned bank, with a strong selection of home loan options.
• Teachers Mutual Bank: Teachers Mutual Bank specialises in providing home loans and financial products for educators, healthcare workers, and more.

Digital Banks

These digital-first lenders are all about convenience and simplicity, offering loans exclusively online:

• Up Bank: Up Bank is a digital bank that offers an easy-to-use app, great savings accounts, and home loans for tech-savvy people.

Non-Bank Lenders

These lenders are not traditional banks. They specialise in offering specific types of loans, often focusing on niche markets or offering alternative lending options.

• Pepper Money: Pepper Money focuses on lending solutions for individuals with complicated credit profiles.
• Firstmac: Firstmac provides competitive rates on home and investment loans for various borrower profiles.
• La Trobe Financial: La Trobe Financial provides tailored home loan options for individuals with unique financial situations.
• RedZed: RedZed focuses on creating home loan solutions for borrowers who are self-employed or have complex financial needs.

Our mortgage brokers at Freedom Loans work with lenders across the board – we can help you weigh your options to find the best fit for your goals. Whether it’s a big bank, a customer-owned institution, or a specialised non-bank lender, we’re here to guide you every step of the way. 

Lenders’ Interest Rates

Housing and Business Rates (December 2024)

Disclaimer: It’s important to note that these rates are not provided by Freedom Loans and may change at any time.

Latest News

ABC News: Why are the banks waiting to pass on the Reserve Bank’s rate cut?

• In the wake of the Reserve Bank of Australia’s decision to lower rates, leading financial institutions announced plans to reduce mortgage rates, although the changes will only be implemented later.
• While a number of smaller lenders responded right away, the major banks – Commonwealth Bank, ANZ, NAB, and Westpac – have arranged for their rate reductions to take effect several weeks down the line.
• Since banks are not obligated to immediately pass on rate cuts, historical data shows that adjustments typically take between 10 and 17 days to be applied.
• This postponement in offering lower rates enables banks to preserve their profit margins despite the downward trend in interest rates.
• Borrowers might not see an automatic drop in their repayment amounts, as some banks require a formal request for the adjustment.
• Although delaying the rate cuts may lead to extra interest costs for some, those who maintain their current repayment schedules could potentially pay off their mortgage sooner.
• Financial experts recommend that borrowers closely monitor their lenders and consider refinancing options to take advantage of improved rates as market competition grows.

Yahoo! Finance: Dates Australian banks will pass on interest rate cut to mortgage holders after RBA move

• Australian banks are set to implement the Reserve Bank of Australia’s latest decision, reducing the cash rate from 4.35% to 4.10%.
• While several lenders have initiated the changes without delay, the major banks have planned to roll out their new rates over the next few weeks.
• According to analyst Graham Cooke, even a short delay in applying these rate cuts can lead to millions in extra revenue for banks.
• A detailed timetable reveals when various institutions – including NAB, Commonwealth Bank, ANZ, and Westpac – will activate the lower rates, with effective dates between February 25 and March 8.
• The monthly savings from the 0.25% rate reduction vary based on the size of the loan, the borrower’s location, and specific repayment terms, with estimated savings ranging from $40 to $190.
• Homeowners in Sydney are anticipated to benefit the most, with potential monthly savings of around $190, whereas apartment owners in the Northern Territory might see monthly savings of about $40.
• Despite the relief offered by the rate cut, ongoing challenges with housing affordability mean that experts believe further reductions might be necessary to achieve a significant impact.

FAQs on Home Loan Interest Rates

How does the cash rate of the RBA impact the interest rate update of home loans?

The Reserve Bank of Australia’s (RBA) cash rate acts as a starting point for lenders when setting home loan interest rates. When the cash rate goes up, so do mortgage rates, which can make repayments more expensive. On the other hand, a lower cash rate often leads to cheaper borrowing. However, note that the cash rate is just one piece of the puzzle, as lenders also consider other factors, like funding costs and market competition.

What is the current interest rate for home loans?

Home loan interest rates in Australia can vary depending on the lender, but they’re all influenced by the RBA’s cash rate, which is 4.10% as of February 2025. Currently, most variable rates for owner-occupiers fall between 6% and 7%, while fixed rates tend to be a bit higher, especially for longer terms. To know the most accurate rate for your specific situation, it’s a good idea to check with your lender or visit comparison websites showing the latest rates in the market.

Should I choose a fixed or variable interest rate?

Choosing between a fixed or variable rate depends on what works for your situation. A fixed rate keeps your interest rate the same for a set period of time – which is great if you’re worried about rates going up. A variable rate, however, moves with the cash rate – meaning you could save when rates drop but pay more if they climb. Some borrowers play it safe with a split loan, combining fixed and variable rates for a bit of both.

What is a good home loan interest rate?

A “good” interest rate really depends on the market and the type of loan you’re looking at (fixed or variable), but generally, it’s below the national average, which shifts with the RBA cash rate. At present, variable rates for owner-occupiers hover around 6-7%, but your actual rate will depend on factors like your credit score, deposit size, and loan type. The key is to compare your options and find a rate that aligns with your goals.

How can I reduce my home loan interest rate?

Refinancing your loan could be a great way to reduce your interest rate, especially if current rates are better than when you first signed up. A bigger deposit or a better credit score can also help you score a better rate. Furthermore, it’s worth comparing offers from different lenders, exploring features like offset accounts, or choosing a shorter loan duration to save on interest in the long run.