RBA Interest Rate Decision 2025: What It Means for Your Mortgage

RBA Holds Rates Steady at 3.85%

The Reserve Bank of Australia has kept the official cash rate at 3.85% for the eighth consecutive meeting, maintaining its cautious stance as inflation remains stubbornly above the target range. This decision impacts millions of Australian mortgage holders who continue to face elevated repayment costs.

Governor Michele Bullock emphasised that while inflation has moderated from its peak, it remains too high at 3.8%, well above the RBA's 2-3% target band. The central bank remains focused on bringing inflation back to target while trying to preserve employment gains.

What This Means for Your Mortgage Repayments

For Australian homeowners, the sustained high interest rates continue to bite. Here's how different mortgage sizes are affected:

When Will Rates Finally Drop?

Market economists are divided on when the first rate cut will come. The majority now expect the RBA to begin cutting rates in:

• Commonwealth Bank: February 2026
• Westpac: November 2025
• ANZ: February 2026
• NAB: May 2026

This means mortgage holders should prepare for rates to remain elevated for at least another 12-18 months, making refinancing decisions more critical than ever.

Should You Fix or Stay Variable?

With rates expected to remain high, many borrowers are wondering whether to fix their rate or stay variable. Currently:

Action Steps for Mortgage Holders

With rates staying higher for longer, here's what you should do:

1. Review your current rate: Many borrowers are paying 0.5-1% more than necessary. Check if your rate is competitive.
2. Calculate refinancing savings: Use our calculator to see how much you could save by switching lenders.
3. Consider splitting your loan: Fix a portion for certainty while keeping some variable for flexibility.
4. Make extra repayments: If possible, pay down your loan faster while rates are high.
5. Get professional advice: A mortgage broker can help you navigate the complex market and find the best deal.

The Bottom Line

The RBA's decision to hold rates means mortgage stress will continue for Australian households. However, this also creates opportunities for savvy borrowers to refinance and save thousands of dollars annually.

Don't wait for rates to drop – take action now to ensure you're not overpaying on your mortgage. Even a 0.5% reduction in your rate could save you hundreds of dollars each month.