What does the rate cut mean for my mortgage? RBA cash rate cut explained

Jaime Bedoya
5 days ago
5 min read

With the Reserve Bank of Australia (RBA) cutting rates again in August 2025, many Perth homeowners and would-be buyers are asking the same questions: What does this mean for my mortgage? Should I be looking at a variable rate home loan? What are the current rates and how do I compare my options?

In this article, Aspire2Wealth adviser Jaime provides a clear summary of the latest RBA decision, alongside practical guidance on variable rate home loans - including the types of loans you might want to consider, key features, strategies for borrowers, and how to decide if a variable rate is right for you.

Whether you’re already repaying a loan or planning to borrow, this guide will help you make informed decisions in today’s shifting market.

A third rate cut in 2025

The Reserve Bank of Australia cut the cash rate for the third time in 2025 in August, lowering it by 0.25 percentage points. This follows a July pause and comes as inflation slows to 2.7% and unemployment rises to 4.3%, the highest since late 2021.

For variable mortgage rate of 5.5% a $750,000 loan, would mean a saving of about $120 per month — or roughly $370 less compared to repayments at the start of 2025.

House values update

Cotality’s August Housing Chart Pack shows that rental growth across capital cities is picking up, rising 3.0% year-on-year in July. This may feed back into housing-related inflation, which the RBA is keeping a close eye on.

In Perth, conditions are particularly strong:

Dwelling values rose 0.9% in July, marking the strongest monthly gain since September last year.
Over the past 12 months, unit values jumped 10.4%, outpacing house growth at 6.0%.
Listings remain around 20% below average, keeping competition high and supply tight.

For Perth buyers and homeowners, this means demand is likely to remain strong — especially through the spring selling season — but affordability will keep playing a limiting role.

Check the dwelling values in your capital city

What is a variable rate home loan?

A variable rate home loan is a loan where your interest rate can move up or down over time, usually in response to RBA cash rate decisions and broader market conditions.

This means repayments can change — sometimes easing, sometimes rising. For many borrowers, the flexibility of a variable loan provides opportunities to pay off a mortgage faster, but it also comes with uncertainty.

What are the current rates?

As of August 2025, the RBA’s cash rate sits at 3.6%, and the average variable home loan rate is about 5.5%. While this is lower than earlier in the year, rates remain well above the pre-COVID decade average of 2.55%Cotality RBA rates comm….

Types of variable home loans you might want to consider

If you’re looking to borrow, there are a few different types of variable rate loans you might come across.

Each works slightly differently and may suit different goals:

Standard variable rate loans – Often include flexible features such as offset accounts or redraw facilities. These can be attractive if you’d like the option to make extra repayments and still access your money when needed.
Basic variable rate loans – A simpler option with fewer features. These may appeal if you want a no-frills loan structure and are focused on managing repayments without extra complexity.
Introductory or discounted variable loans – These begin with a lower rate for a set period, offering short-term relief. Borrowers should plan ahead though, as repayments usually increase once the discount period ends.

Strategies for borrowers

If you’re considering a variable rate loan — or already have one — a few strategies can help you make the most of it:

Make extra repayments when you can – Even small amounts, like $50 a week, can reduce the life of your loan and save thousands in interest.
Take advantage of an offset account – Keeping your savings linked to your mortgage reduces the interest charged and can shorten your loan term.
Plan for ups and downs – Rates are easing now, but they won’t always. Building a buffer into your budget can give you confidence if repayments rise again.
Review your loan regularly – Circumstances and goals change. Checking your loan annually helps ensure it still supports your lifestyle and long-term plans.

When should you choose a variable rate?

Variable rates can be a good choice if you:

want flexibility and the option to pay extra without penalties.
expect interest rates to fall further.
value features like redraw facilities and offset accounts.

If your priority is certainty and consistency in repayments, a fixed rate may sometimes be worth considering instead.

Variable rate home loan features

Variable loans often come with features that can provide both flexibility and long-term savings.

Offset accounts – Reduce the interest charged by linking your savings to your mortgage balance.
Redraw facilities – Allow you to access extra repayments if you need them later.
Flexible repayment schedules – Choose weekly, fortnightly, or monthly payments to match your income cycle.

How to compare variable home loans

When comparing loans, it’s important to look beyond the headline rate and consider other factors.

Comparison rates – These account for fees and charges, giving a clearer picture of the real cost.
Features you’ll actually use – The right loan is one that aligns with your lifestyle, not just the one with the most features.
Flexibility – Check whether you can adjust repayments or make extra contributions if needed.
Your long-term goals – Make sure the loan structure supports your broader financial strategy, not just the short term.

Looking ahead

The RBA meets three more times in 2025: September, November and December. Market expectations suggest the cash rate could edge down to 3.2% by year’s end and 3.1% by March 2026.

For Perth households, this signals that while repayments should keep easing, relief will come gradually. Careful planning remains essential.

Thinking about your next move?

With interest rates easing but affordability still stretched, now is a good time to reflect on your options and how a variable rate might fit into your broader financial plan.

At Aspire2Wealth, we support Perth households and investors to:

review existing loan structures and repayment strategies.
explore opportunities for new purchases or investments.
connect mortgage decisions with long-term wealth and retirement planning.

👉 Book a consultation.

References

Aspire2 Wealth Advisers Pty Ltd ABN 42 125 897 903 is an authorised representative and credit representative of Charter Financial Planning Limited ABN 35 002 976 294, AFSL and Australian Credit Licence No. 234665.

This website contains information that is general in nature. It does not take into account the objectives, financial situation, or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.