‘A July cut is in the bag’: Experts unanimous in rate cut predictions

Australia’s mortgage holders are on the verge of another financial break, as a vast majority of experts forecast the Reserve Bank of Australia (RBA) will deliver its third interest rate cut for 2025 this month.

According to Finder’s July RBA Cash Rate Survey™, 88 per cent (30 out of 34) of leading economists and experts expect the RBA to lower the cash rate by 25 basis points to 3.60 per cent during its next meeting.

If banks pass this cut on in full, it could mean significant annual savings for homeowners across the country.

Graham Cooke, Head of Consumer Research at Finder, believes another rate cut would offer a much-needed confidence boost to homeowners who are grappling with the cost of living.

“We’ve seen two cash rate cuts already, but homeowners are chomping at the bit for more,”

Cooke said. “Inflation is continuing to reduce, which means the RBA is likely to cut and the banks will be under a lot of societal pressure to pass on the full rate cut again in July.”

The pressure on banks to deliver the full benefit to borrowers is intensifying.

Finder’s Cost of Living Pressure Gauge recently dropped slightly to 74 per cent, but Cooke warns it remains in borderline extreme territory.

“The first bank to hold back some of the cut will be publicly shamed,” he added.

“Even if you get the full decrease, you may be able to give yourself another by switching. If your home loan is over 5.5 after this cut, you’re paying too much.”

ANZ is the first of the big four banks to drop their rate ahead of the RBA decision.

ANZ recently reduced interest rates on a selection of its fixed-rate home loan products by as much as 50 basis points. The lender’s new lowest two-year fixed rate for owner-occupiers with a loan-to-value ratio of 80 per cent or less now stands at 5.19 per cent per annum (with a comparison rate of 6.44 per cent per annum).

How much you could save

For those with a $500,000 mortgage, a full 25 basis point cut in July would equate to $80 in monthly savings, or $956 over a year.

If all three 2025 rate cuts are factored in, these savings jump to $134 per month or $1,613 annually.

Borrowers with a $1 million mortgage could save as much as $3,226 annually compared to the start of the year.

Matthew Peter from QIC is adamant that the RBA will move in July. “A July cut is in the bag,” he said.

“Underlying inflation is within the RBA’s target band and falling, consumer spending is disappointing and the market is expecting a rate cut. No reasons for the RBA to wait.”

The latest home loan analysis further illustrates how significant these savings could be for Australians:

• $500,000 loan: $80/month or $956/year (July cut only), $134/month or $1,613/year (3 cuts in 2025)
• $750,000 loan: $120/month or $1,435/year (July cut only), $202/month or $2,420/year (3 cuts in 2025)
• $1 million loan: $159/month or $1,913/year (July cut only), $269/month or $3,226/year (3 cuts in 2025)
• Average Australian loan ($659,920): $105/month or $1,262/year (July cut only), $177/month or $2,129/year (3 cuts in 2025)

Source: Finder, RBA. Based on home loan rate of 6.12% as at Jan 2025 (Outstanding owner-occupied home loan variable)

These projections are based on a standard home loan rate of 5.95 per cent as of May 2025. Finder also estimates that the current average home loan in Australia sits at $659,920, according to the ABS.

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Cooke emphasised that rate cuts present homeowners with a unique opportunity to reduce their debt faster.

“If you can afford to, don’t lower your repayments just because your rate has dropped,” he said.

“Keeping your repayments steady means you’ll chip away at the principal faster, saving thousands of dollars in interest over the life of your loan.”

Looking ahead, the sentiment among economists is that this rate cut won’t be the last for 2025.

Of those who participated in the survey, 76 per cent (19 of 25) expect another rate cut in August, while 52 per cent (13 of 25) forecast a further cut in November.

Finder’s Consumer Sentiment Tracker (CST) also reveals that while mortgage stress has reached a two-year low, around 34 per cent of homeowners are still struggling to meet their loan repayments.

Experts weigh in

Experts contributing to the survey were unanimous in identifying key reasons for supporting a rate cut: falling inflation, sluggish GDP growth, and global economic uncertainty.

Several academic and industry experts have pointed to a consistent set of economic indicators supporting the likelihood of a July rate cut.

Evgenia Dechter from UNSW highlighted that the RBA may be moved to act due to “easing inflation, weak GDP growth, and heightened global uncertainty.”

This view is supported by Shane Oliver of AMP, who noted that recent data points to “a further fall in inflation and weaker than expected GDP and economic activity,” which he believes will prompt the RBA to return the cash rate closer to a neutral setting.

From the financial services sector, David McQueen of Loan Market noted that consumer behaviour is already responding to prior cuts. “Pre-approval applications rose 7 per cent after the May rate cut and are 53 per cent higher than the same period last year,” he said. “Buyers are getting their finances in order and positioning themselves to act.”

Further supporting the call for a cut, James Morley from the University of Sydney cited that the trimmed mean inflation rate now sits at 2.4 per cent, below the RBA’s forecast. He also highlighted that while uncertainty remains, the upside risk for inflation seems minimal under current conditions.

Together, these expert insights paint a picture of broad consensus: the Australian economy is under pressure, inflation is easing, and the RBA has sufficient room to act.

As Graham Cooke concluded, this convergence of opinion and data means borrowers should be proactive.

“Talk to a broker. Know where you stand. Make sure your lender is giving you the full benefit. And if they’re not, be ready to move.”

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