Interest rates have dropped again by 25 basis points, increasing the borrowing capacity of buyers and easing repayments for existing mortgage holders.

The Reserve Bank of Australia (RBA) met this week and dropped the official rate to 3.85%. Many of Australia’s big banks had already started reducing the fixed rates they offered to new customers ahead of the RBA move.

It is the second cut by the RBA in 2025, following a cut in February. According to Canstar data the most recent cut could save an owner occupier with a $600,000 mortgage, $91 per month. Canstar data insights director Sally Tindall believes the majority of lenders will pass on the full cut.

The RBA says inflation has fallen substantially since the peak in 2022, as result of the higher interest rates. But it warns the future outlook of the economy is uncertain, particularly as a result of uncertainty around tariffs imposed by the US. It says real household incomes have picked up and there has been an easing in some measures of financial stress.