Interest rates fall to 3.60%: Big Four banks react to RBA decision

After a surprise hold in July, RBA Governor Michele Bullock and the rest of the Board delivered a 25 basis point cut to Australia's cash rate at the end of the central bank's monetary policy meeting on 8 July.

This is the lowest level the cash rate has been since March 2023, after a cumulative 75 basis point cut this year.

The RBA commenced the easing cycle in February 2025, shedding 25 basis points from then peak benchmark rate of 4.35%.

This was followed by another 25 basis point cut in the meeting in May.

Days before the announcement, all four major banks were fully priced that a 25bps rate reduction would finally materialise as June quarter CPI confirmed underlying inflation is well within the long-term target.

"The RBA surprised with a 'no change' decision in July, but we think several factors will enable the Board to cut in August," said Adam Boyton, head of Australian Economics at ANZ.

Mr Boyton was, of course, referring to the June rise in unemployment rate and the trimmed mean inflation falling around the midpoint of the target band.

ASX traders, however, were split by the close of 11 August, with 51% tipping a cut while 49% expecting a hold.

The 'no change' surprise last month may have dampened enthusiasm among the Big Four, with announcements from the majors coming noticeably slower this time than when the RBA cut the cash rate in May.

CBA

Commonwealth Bank of Australia was the first of the Big Four to respond, albeit almost an hour after the RBA's announcement.

Effective 22 August, the bank will cut all variable home loan rates by 0.25% p.a.

"With now three rate cuts this year, Australian borrowers are getting some breathing room back in their budgets. It will be very welcome for those with a home loan," said Angus Sullivan, CBA's Retail Group Executive.

CBA data shows the cumulative 75 basis point cuts delivered so far in 2025 could translate to hundreds of dollars in annual savings for its home loan customers.

"We want to make it as easy as possible for our customers to take advantage of the cut in the way that makes sense for them. Tools like our Mortgage Repayment Calculator show you the difference an extra repayment can make. They're easily accessible in the CommBank app and NetBank," Mr Sullivan noted.

The bank also announced a 0.25% p.a. reduction on its variable rate business lending products.

Prior to the meeting, the CBA forecasted that a 25 bps cut was "as close to a done deal".

Westpac

Westpac will also pass on the full 25 basis point cut to new and existing variable rate home loan customers, effective 26 August.

"Following the Reserve Bank's decision, we're making further reductions to home loan interest rates," said Carolyn McCann, Westpac Chief Executive, Consumer.

"We know many people continue to manage cost of living pressures and three rate cuts this year will no doubt provide some relief to household budgets."

Westpac said customers paying principal and interest will be notified directly about how the change will affect their repayments and the ways they can adjust them, which includes via the app, the website or by contacting the bank.

According to the bank, the latest rate change, together with the previous reductions announced in February and May, means customers paying principal and interest on a $500,000 mortgage could be saving an extra $266 per month or $3,192 per year.

The bank will also apply the full cut to its savings account products.

The standard variable bonus rate on Westpac Life will decrease by 0.25% p.a., effective 22 August.

New customers applying for Westpac eSaver will also see a reduced five-month introductory rate, down from 4.50% p.a. to 4.25% p.a., effective 22 August.

Shortly after the release of Q2 CPI, Westpac also forecasted the RBA to trim 25 basis points from the cash rate today.

"[The June quarter CPI] data removes any awkwardness posed by inflation remaining too high for the RBA's comfort, at the same time that the labour market might be starting to pick up again," explained Luci Ellis, Westpac Group chief economist.

Westpac also expects another cut in November, followed by two more in February and May 2026.

ANZ

ANZ is lowering variable home loan rates by 0.25% p.a. beginning 22 August.

"We're pleased to reduce our variable home loan rates at a time when a number of homeowners still need some extra breathing room," said Bruce Rush, ANZ Acting Group Executive Australia Retail

"As we pass on further rate relief to our customers, some will use it to help take the pressure off their everyday expenses, while others will take the opportunity to keep their existing repayments and get ahead on their home loan."

Back in July, ANZ was the last to fall in line with its peers, tipping the next cut wouldn't happen until the August meeting, only to revise it following weak retail sales data.

Similar to its Big Four peers, ANZ forecast a cut in August with a follow-up in November.

However, unlike the other majors, the bank expects the cash rate will stay at 3.35% for an extended period.

NAB

From being the first to move in May, NAB trailed behind its Big 4 peers, being the last to announce home loan rate changes following the RBA's decision on Tuesday.

NAB is passing on the full 25 basis point cut to variable home loan customers, effective 25 August.

"Today's RBA cash rate cut is a welcome change that should boost Australian optimism," said Ana Marinkovic, NAB's Group Executive for Personal Banking.

"We expect consumer confidence to pick up as households benefit from lower interest rates, and businesses ramp up hiring and expansion, giving workers a stronger sense of job security."

Alongside the latest rate change, NAB has launched a new self-serve feature in its banking app, allowing customers to request a review of their home loan repayments.

To use the new feature, customers need to open their NAB app, tap on their home loan, tap 'Manage', and select 'Update your minimum repayment'.

"If you want to lower your repayments, you can do it in under a minute, right from the NAB app," Ms Marinkovic said.

"NAB doesn't automatically reduce repayments when rates fall, and that's by design," she added.

"Some people want to ease the pressure and reduce their repayments. Others want to keep them the same and get ahead on their loan."

NAB data shows more than 90% of its customers chose to keep their repayments unchanged after the last cut, which meant saving thousands in interest and paying off their loans early.

For example, a customer with a 30-year mortgage of $550,000 could save almost $80,000 in interest and pay off their loan two years earlier by keeping repayments the same after a 0.25% rate cut.

Following the August cut, NAB expects the RBA to cut rates again in November and February, bringing the cash rate down to 3.10%.