8 Lenders Trim Rates Even as the RBA Keeps Hiking

Competition is forcing lenders to cut rates in a hiking cycle — here's what that $209-a-month gap means for borrowers right now.

When the Reserve Bank raises interest rates, conventional wisdom says home loan rates follow. Over the past two months, Australia's mortgage market has been doing the opposite.

In the seven days to 19 July 2026, not a single lender lifted home loan rates, while eight lenders trimmed fixed or variable pricing, according to Australian Broker. Since the RBA's May rate hike, 23 lenders have now cut variable rates at least once — while the cash rate itself has risen three times this year.

So what is driving the divergence, and what does it mean if you are sitting on a home loan right now?

Lenders Are Competing for a Smaller Pool of Borrowers

The answer comes down to supply and demand — of borrowers, not of money.

Home values fell in June at their fastest monthly pace since late 2022. Sydney and Melbourne have both been posting negative growth, which means fewer people are actively in the market to buy. Fewer buyers translates directly into fewer new mortgage applications, and that shrinkage in the customer pool is forcing lenders to compete harder on price to win the business that does exist.

In the week to 19 July, five lenders — Australian Mutual Bank, Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank, and UniBank — cut ten investor interest-only variable rates by an average of 0.15 percentage points. Horizon Bank, ING, and Woolworths Team Bank trimmed eight fixed rates across owner-occupier and investor categories by an average of 0.16 percentage points.

These are not macro-policy decisions. They are commercial decisions made by lenders sharpening their new-customer pricing to stay competitive. As a borrower, that distinction matters because it tells you something important: the sharpest rates available in the market reflect competitive pressure, not RBA guidance, and that competitive pressure does not automatically flow to your existing loan.

The Gap That Could Be Worth $2,500 a Year

Here is where things get concrete.

The average variable rate for owner-occupiers on principal-and-interest loans currently sits at 6.66%. The RBA's own measure of what existing borrowers are actually paying averages 6.26%. Some lenders are now pricing variable products at 5.69% — offered by both LCU and Pacific Mortgage Group — and Horizon Bank is among three lenders with at least one product priced below 5.75%.

That spread between the average rate existing borrowers pay (6.26%) and rates on offer at 5.69% translates to roughly $209 a month in repayments on a $600,000 loan. Annualised, that is around $2,500 — sitting there for borrowers who have not checked whether they are still on a competitive rate.

This is a number many borrowers could actually recover by taking action. Use our refinance savings calculator to see exactly how much a rate reduction of a given size would change your monthly repayment — and how long it would take to cover any switching costs.

If you want to understand the range of rates currently available to you, our home loan comparison tool gives you a current view of the market across a wide range of lenders.

A Fourth RBA Hike Is Still Possible

A fourth rate rise remains on the table. The RBA Board meets on 11 August, and there are two key data releases before that decision: labour force figures due Thursday and June quarter inflation numbers due the following week. Westpac has flagged an August hike in its forecasts, projecting the cash rate could peak at 4.85%.

Importantly, the past few months have demonstrated that an RBA hike does not automatically translate one-for-one into a borrower's variable rate rising by the same amount. Competitive pressure can offset at least part of the increase — as the 23 lenders cutting rates since May illustrates clearly. That said, the RBA's tightening cycle does feed through to variable rates over time, and borrowers on standard variable products will typically see movement within weeks of an RBA decision.

The practical implication: if you have been thinking about reviewing your home loan, the weeks before the August decision are a better time to act than the weeks after.

What to Do Right Now

For borrowers who have not reviewed their home loan in the past 12 months, here is a straightforward checklist.

**Know your rate.** Pull out your most recent loan statement and write down the interest rate you are currently paying. It may be different from what you expect.

**Compare it to the market.** A 0.5 to 1 percentage point gap between your existing rate and what is available to a new borrower is common for people who have not refinanced in two to three years. Our cheapest home loans page shows current pricing across a wide range of lenders.

**Call your lender first.** A retention call — asking your bank to match a better rate you have seen elsewhere — is free and often effective in a competitive environment. Lenders are more receptive to these requests when they are chasing a shrinking borrower pool.

**Run the numbers on refinancing.** If your lender will not budge, refinancing may be worth exploring. Factor in any discharge and settlement fees before committing, and use our borrowing power calculator to understand what you would qualify for at current conditions.

**Act before 11 August.** If you are planning a move, doing it before the next RBA decision removes one variable from the equation.

Australian Broker reports that the gap between average variable rates and the sharpest market pricing is currently large enough to absorb another rate hike and still leave a switching borrower better off. That is the strongest argument yet for not waiting.