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The RBA has delivered the first cash rate cut since 2020, reducing it by 0.25% to 4.1%. While banks may take up to two weeks to decide whether to pass on the full reduction, borrowers could see a slight boost of 2-3% in their borrowing capacity. Lenders will announce their updates at different times, but no need to worry – we are closely monitoring these updates, and we will keep you informed as new details come in.
At Unconditional Finance, we aim to simplify these concepts for you. We break down the fundamentals of the cash rate, explain its influence on the interest rate update of home loans in Australia, and share insights on mortgage rates. We also provide a list of lenders offering home loan options – empowering you to make smarter choices and take charge of your financial future.
The RBA sets the cash rate as a benchmark interest rate that shapes the cost of financial products such as home loans, personal loans, savings accounts, and term deposits. It reflects the rate banks charge one another for short-term ‘overnight loans’ to balance their daily cash needs. The RBA adjusts this rate to steer Australia’s economy, aiming to regulate inflation, foster employment growth, and ensure financial security. For example, raising the cash rate can help curb inflation by reducing spending, while a lower rate encourages borrowing and boosts economic activity.
Home loan rates commonly respond to shifts in the cash rate. A reduction in the cash rate typically leads to lenders lowering interest rates, easing the financial burden for first-time buyers and existing homeowners. Conversely, when the cash rate increases, mortgage repayments tend to rise. Even minor shifts in the cash rate can significantly influence your long-term loan expenses, which is why staying informed about these changes is crucial for effective financial planning.
Although the RBA sets the cash rate as a benchmark, the actual home loan interest rates you’ll receive depend on various factors. These include your loan’s interest type and term length, as well as your loan-to-value ratio (LVR).
Fixed-rate home loans come with interest rates that vary based on the term, typically from one to five years. For example, the current average rate for a two-year fixed-rate home loan for owner-occupiers is 6.03%. Shorter terms often have lower rates, while longer terms offer the advantage of shielding you from changes in interest rates. If you value predictability and want consistent repayment amounts, a fixed-rate loan might be the right fit for your needs.
Variable interest rates are closely tied to the RBA’s cash rate movements. Currently, the average variable rate for owner-occupiers paying principal and interest is around 6.71%. However, these rates can differ widely between lenders and may also vary depending on your unique borrowing profile. Variable rate home loans offer flexibility and potential savings when rates drop, but you should also consider the risk of higher repayments if the cash rate increases.
Lenders generally charge slightly higher interest rates for investment loans compared to owner-occupier loans due to the increased risk associated with investment properties. Nevertheless, both investors and owner-occupiers can choose between fixed and variable rate options to find the most competitive deal tailored to their situation.
Australia has a broad range of mortgage lenders, including traditional banks, customer-owned institutions, and non-bank financial providers. Each lender offers home loan products designed to meet diverse needs and preferences. In this section, we provide you with an overview of several lenders in Australia and their offerings. You can also click the provided links to view each lender’s interest rate update as of today.
Australia’s home loan market is led by the Big Four banks, offering an array of mortgage solutions tailored to various financial needs.
Outside the Big Four, these respected institutions provide competitive home loan products in Australia.
These member-driven institutions, including credit unions and mutual banks, offer a wide range of mortgage options tailored to community needs.
These customer-owned banks focus on providing tailored home loan solutions for specific professions or community groups.
These banks simplify the mortgage process by offering user-friendly and efficient online solutions.
These financial institutions specialise in lending but operate independently of traditional banks, offering tailored home loan options for borrowers with specific needs.
Disclaimer: Please be advised that Unconditional Finance does not offer these rates, which may change at any time.
| Loan purpose | Outstanding loans % per annum | New loans % per annum |
|---|---|---|
| Housing (Table F6) | ||
| Owner-occupier | 6.13 | 6.22 |
| – Principal-and-interest | 6.10 | 6.15 |
| – Interest-only | 7.00 | 7.02 |
| Investment | 6.49 | 6.45 |
| – Principal-and-interest | 6.42 | 6.38 |
| – Interest-only | 6.66 | 6.56 |
| Business (Table F7) | ||
| Small business | 7.43 | 7.27 |
| Medium business | 6.26 | 6.04 |
| Large business | 5.81 | 5.58 |
a) Includes loans at variable and fixed interest rates Sources: APRA; RBA | ||
ABC News: Reserve Bank cuts interest rates for the first time since November 2020
At Unconditional Finance, we turn interest rate changes into opportunities for smarter financial decisions. Whether you’re refinancing, buying your first home, or growing your investment portfolio, our expert advice simplifies complex financial information and helps you secure a loan tailored to your unique goals. Save time and effort while staying ahead and achieving your financial aspirations with clear, personalised insights from our team.
The Reserve Bank of Australia’s (RBA) cash rate acts as a baseline for lenders when setting home loan interest rates. When the cash rate rises, mortgage rates usually follow, increasing repayment costs. On the other hand, a decrease in the cash rate can lead to lower borrowing costs as lenders adjust their rates downward. However, factors like market conditions and lenders’ operational costs also play a role, so the cash rate is only part of the equation.
Whether you should choose a fixed or variable rate depends on your financial priorities and future plans. Fixed rates provide certainty by locking in your repayment amounts for a specific term, which is helpful if rates are expected to increase. Variable rates, however, adjust with the cash rate, offering potential savings when rates drop but higher repayments if rates rise. A split loan, which combines fixed and variable rates, can offer both stability and flexibility. Consulting a mortgage broker can help identify the best option for your situation.
A good interest rate for a home loan usually sits below the national average, which shifts based on the RBA’s cash rate and market trends. Currently, owner-occupier variable rates are typically between 6% and 7%. Your personal rate will depend on your deposit size, loan structure, and credit profile. Comparing offers from various lenders can help you find a rate that aligns with your goals and financial position.
Interest rates for home loans vary per the lender and the RBA’s cash rate, which is set at 4.1% as of February 2025. Variable rates for owner-occupiers generally range from 6% to 7%, while fixed rates vary depending on the loan term, with longer terms often slightly higher. Using comparison platforms or checking each lender’s website can give you accurate information about their latest interest rate update in Australia.
A popular way to access lower rates is refinancing your home loan, particularly if market rates are more favourable than your current one. You can also reduce your interest rate by enhancing your credit score, increasing your deposit, or opting for a shorter loan term. Negotiating directly with your lender or features like offset accounts can also help minimise the overall interest you need to pay over the life of your loan.
We dedicate ourselves to working efficiently to save our clients both time and money. Additionally, we’re pleased to arrange meetings at times that suit your schedule.
We help our clients save money by offering expert guidance and customised mortgage solutions. By negotiating competitive interest rates and identifying cost-saving opportunities, we ensure our clients get the best possible deals.
Over our 25+ years as mortgage brokers, we have helped countless individuals and families reach their financial goals.
Whilst home loans are usually used to purchase somewhere to live, we understand that situations can quickly change when dealing with the medical profession. A doctor may be living in a capital city, for example, but decide to work in a rural location for a period of time. The property they bought as an owner-occupier could suddenly become an investment property six months down the line.
The team at Unconditional Finance can help doctors and other medical professionals to find a home loan that suits their particular situation.
While it might seem simple for medical professionals to secure a home loan, the additional benefits offered make this process more complex. The team at Unconditional Finance has many years of experience in home loans for doctors; we take the time to understand your unique situation and needs and then find a loan to suit you. Whether you need to meet with us after hours, at your workplace or even at your home, we are committed to making the application process as convenient as possible.
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