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At its August monetary policy meeting, the Reserve Bank of Australia (RBA) handed down its third cash rate call of the year.
At its August monetary policy meeting, the Reserve Bank of Australia (RBA) handed down its third cash rate call of the year. The central bank has cut interest rates by 25 basis points, bringing the official cash rate to 3.60%. The decision was unanimous, with all board members voting in favour of the cut.
Borrowers can expect modest relief as lenders begin to pass on the reduction. According to Canstar, a full 0.25% cut could mean an extra $89 per month for those with a $600,000 mortgage, with the average variable rate now sitting at 5.54%.
Meanwhile, property prices continued to climb in July, rising 0.6% nationally for the third consecutive month. Every capital city posted gains, led by Darwin (+2.2%), Perth (+0.9%), and Brisbane/Adelaide (+0.7%). Even slower markets like Melbourne (+0.4%), Canberra (+0.5%), and Hobart (+0.1%) saw positive movement.
One standout stat: the price gap between houses and units has hit a record high, with houses now valued 32.3% higher than units – a difference of around $223,000.
Looking ahead, further rate cuts and tight housing supply are expected to support continued growth, though affordability and household debt remain key constraints.
If you’re unsure how this change affects your home loan, speak to your mortgage broker. The RBA’s next meeting is scheduled for Tuesday, September 30.
Further questions
How much will the August 2025 RBA rate cut save me on my mortgage payments?
The Reserve Bank of Australia's August 2025 decision to cut the cash rate by 25 basis points to 3.60% will provide meaningful relief for variable rate mortgage holders. For those with a $600,000 mortgage, this translates to monthly savings of around $95, assuming they have an average interest rate of 5.73% per annum for owner-occupiers making principal and interest repayments RBA cuts cash rate to 3.60%: $95 back for average mortgage holder. This marks the third rate cut of 2025, bringing the total reduction to 75 basis points since the start of the year. If lenders pass on all three cuts in full, the average Australian with a $600,000 variable rate home loan could be paying $272 per month less than at the beginning of 2025 RBA Cuts The Cash Rate For A Third Time In 2025. Commonwealth Bank was among the first to announce they would pass on the full 0.25% reduction to variable home loan rates, effective from August 22, 2025 CBA cuts home loan interest rates. The big four banks – CommBank, Westpac, NAZ, and ANZ – generally passed on the full cut within days August 2025 RBA Cash Rate Cut: Banks and Lenders Cutting Mortgage Rates.If you can afford to maintain your previous higher repayment amount despite the rate cut, you'll achieve higher interest savings and pay off your mortgage faster. For fixed-rate mortgages, this cut won't affect current repayments but may influence decisions when your fixed period expires.
Why are property prices still rising despite higher interest rates over the past few years?
Despite significant interest rate increases since 2022, Australian property prices continue climbing due to fundamental supply and demand imbalances. National home prices recorded 0.6% growth in July 2025, with all capital cities posting gains The Latest Australian Housing Market Stats, led by Darwin (+2.2%), Perth (+0.9%), and Brisbane/Adelaide (+0.7%) The Latest Australian Housing Market Stats.The primary driver is Australia's chronic housing shortage. Building activities are currently at their lowest in a decade, with delays and difficulties in obtaining approvals from local councils persisting Australia's Residential Property Market Analysis 2025. New dwelling completions reached just over 132,000 units between January and September 2024, marking only a modest 1.78% year-on-year increase Australia's Residential Property Market Analysis 2025.Migration sustains demand. Net overseas migration reached 446,000 people in the 2023-2024 financial year, with migrants primarily from India, China, the United Kingdom, and New Zealand Australia's Residential Property Market Analysis 2025. This population growth maintains housing market pressure.Strong rental price growth figures continue to reflect low vacancy rates and a tight rental market, with annual rent growth expected to be around 3.5–4.5% over the next two years House prices to rise by 3.3%, units by 4.6% in 2025 - KPMG Australia. This pushes renters toward purchasing, adding buyer demand. With interest rates moving lower, borrowing conditions are improving just as housing market momentum picks up RBA Cash Rate.
What's causing the record-high price gap between houses and units in Australia?
The price difference between houses and units has reached unprecedented levels. In March 2020, the median price difference between houses and units in capital cities was a modest $85,000, but by June 2024, this difference had ballooned to an astonishing 47%, translating to a price premium of over $300,000 Mind the Gap: The Expanding Price Disparity Between Houses and Units.Pandemic-era shifts drove this gap. Working from home created demand for larger properties with home offices and outdoor spaces – features typically found in houses. Capital city house values rose almost three times as much as unit values since the onset of COVID Property Market Forecast Australia 2025. House Prices Predictions from Expert. However, dynamics are shifting. After underperforming throughout the pandemic period, unit prices recorded stronger growth for much of 2025 as affordability constraints mean more Australians are trading backyards for balconies Property Market Forecast Australia 2025, House Prices Predictions from Expert. Unit prices are expected to gain 4.6% in 2025 and 5.5% in 2026, as they represent a more realistic route into the housing market given the ongoing affordability crisis House prices to rise by 3.3%, units by 4.6% in 2025. Most established apartments are priced considerably below replacement cost, with construction costs for new apartments having risen over 40% in recent years Mind the Gap: The Expanding Price Disparity Between Houses and Units. With houses becoming more unaffordable for many, strong capital growth is expected ahead for family-friendly apartments in great neighborhoods Property Market Forecast Australia 2025.
When will the RBA cut interest rates again and how low could they go?
Following the August 2025 rate cut to 3.60%, market expectations suggest continued easing, though timing depends on economic conditions. The RBA expects underlying inflation to remain near the midpoint as rates follow a gradual easing path, though the Bank remains cautious about global trade tensions and uncertainty over household spending RBA Cash Rate. The next RBA meeting is September 30, 2025. The RBA's updated GDP forecast of 1.7% for 2025, down from 2.1%, and unemployment rising to 4.3% in June signal conditions supporting additional monetary easing Assessing the Impact of the August 2025 RBA Rate Cut on the Australian Housing Market and Mortgage Strategies. Interest rates are expected to keep falling throughout 2025, probably with a rate cut every three months (quarterly), which will likely encourage greater housing investment Property Market Forecast Australia 2025, House Prices Predictions from Expert. Australia's 3-year government bond yield fell to 4.33% in July 2025, reflecting investor confidence in the RBA's easing cycle The RBA Rate Cut and Its Strategic Implications for Mortgage Refinancing and Housing Market Momentum.Domain Group suggests rate cuts may create 'a year of two halves, with a weaker first half and a stronger second' as buyers respond to improved affordability Rate cuts and FOMO to drive property prices in 2025. However, global trade tensions, such as US tariffs, remain risks Assessing the Impact of the August 2025 RBA Rate Cut on the Australian Housing Market and Mortgage Strategies. Most economists expect rates to bottom out between 2.5% and 3.0%, depending on economic developments.
Should I buy property now or wait for further interest rate cuts in 2025?
Current conditions favour acting sooner rather than later. For Australian expats, the combination of lower rates, strong rental yields, and rising capital growth makes the second half of 2025 a prime time to re-enter the market RBA Cash Rate. Rates are falling, opening the door to cheaper borrowing, while stock is tight with listings at multi-year lows, putting pressure on quality properties RBA Cash Rate. Waiting could mean fewer options and increased competition as more buyers enter following additional rate cuts.Interest rate cuts and FOMO are expected to drive activity in the second half of 2025, with an interest rate cut potentially triggering a wave of demand and price growth Rate cuts and FOMO to drive property prices in 2025. However, affordability challenges persist. Australia's median house price-to-income ratio stands at 7.9, with mortgage repayments consuming 50% of average household income The RBA Rate Cut and Its Strategic Implications for Mortgage Refinancing and Housing Market Momentum. National home prices hit a record $827,000 in July 2025 The RBA Rate Cut and Its Strategic Implications for Mortgage Refinancing and Housing Market Momentum. Regional opportunities vary. Darwin and Adelaide are projected to see double-digit growth in 2025 The RBA Rate Cut and Its Strategic Implications for Mortgage Refinancing and Housing Market Momentum. Price growth will be more pronounced in the second half of 2025, aligning with expected interest rate cuts House prices to rise by 3.3%, units by 4.6% in 2025, but early movers may benefit from current lower competition levels.
This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.
