Rate Cuts Roll In Despite August RBA Hike Threat

Five lenders trimmed variable rates last week while five others cut fixed rates — yet the RBA may still hike in August.

The past week has delivered something of a contradiction for Australian mortgage holders: lenders are trimming rates on both variable and fixed products, even as the Reserve Bank signals that the next move for the cash rate could be upward.

For borrowers, that creates both an opportunity and a risk. Understanding both is critical whether you are currently shopping for a loan, considering a refinance, or sitting on a variable rate and wondering whether to act.

Rate Cuts Happening Now

According to Australian Broker, five lenders cut a combined 26 owner-occupier and investor variable rates last week by an average of 0.11 percentage points. A further five lenders reduced 76 fixed rates, with an average reduction of 0.27 percentage points. NAB was among the big four banks to trim fixed rates during this period.

The average variable rate for new owner-occupiers on principal and interest loans now sits at 6.66 per cent, with the keenest variable rates offered by LCU and Pacific Mortgage Group at 5.69 per cent. Only three variable rates across the broader market currently sit below 5.75 per cent — a figure that has held steady despite the broader competitive activity of recent weeks.

These cuts are driven by a few factors. Competition for new borrowers remains fierce, particularly among lenders looking to grow their loan books in a softening property market. Fixed rate reductions also tend to reflect where markets expect interest rates to settle over a multi-year horizon. Even if the next cash rate move is upward, swap rates that underpin fixed-rate pricing can still fall if markets anticipate rate relief further out.

For borrowers who are out of contract or approaching the end of a fixed period, this represents a genuine window to compare the cheapest home loans available and understand what is actually on offer — not just what your existing lender is telling you.

But the RBA Is Not Done Yet

The picture gets more complicated when you look at the Reserve Bank of Australia's current position.

RBA Governor Michele Bullock delivered a speech at the Anika Foundation in Sydney on Tuesday, using it to warn that Australia must be prepared to navigate a more shock-prone world. She cited the ongoing Middle East conflict — noting that five months have passed since the United States and Israel began bombing Iran — and the associated oil price volatility as a continuing complication for the central bank's inflation task.

She was direct about the RBA's readiness to act further. "We tightened monetary policy earlier this year and we remain focused on returning inflation sustainably to target," Bullock said. "Our Monetary Policy Board would be prepared to lift interest rates even higher, if it was necessary to achieve its inflation mandate."

Headline inflation remained at 4 per cent in May — well above the RBA's 2-3 per cent target band. The unemployment rate held steady at 4.4 per cent in June, though Bullock said the labour market was easing "a bit more than expected" in recent months, with the RBA forecasting unemployment to reach 4.6 per cent by the end of next year. Even at that level, Bullock suggested some further easing in labour market conditions would likely be required to bring inflation back to target.

The RBA's board meets in approximately two weeks. Economists remain split on whether a hike will follow. Wednesday's ABS inflation print and any further guidance from the governor will be closely watched for clues on the central bank's thinking.

What This Means for Your Mortgage

The rate environment borrowers face right now is genuinely uncertain — and that uncertainty cuts in both directions.

If you are on a variable rate and feel exposed to a possible further hike, it is worth calculating how another 25 basis points would affect your repayments. Use our borrowing power calculator to model your position under different rate scenarios. Even a modest increase can meaningfully affect cash flow for households already under pressure.

If you are considering fixing your rate — to lock in current pricing or hedge against further increases — it is important to understand what you are giving up. Fixed rates come with break costs if you need to refinance or sell during the fixed period. Currently, the sharpest variable rates remain more competitive than many fixed offers. That said, the certainty of a fixed repayment schedule has genuine value in a stretched household budget.

For borrowers who are ready to act, the combination of variable and fixed rate cuts seen last week represents a genuine opportunity to lock in a better deal through refinancing. The gap between what many existing borrowers are paying and what new borrowers can access through active shopping remains substantial.

The central message: don't wait for certainty from the RBA before reviewing your home loan. By the time August's decision lands, rates could move in either direction. The time to examine your options is before the board meets — not after.

For full details on last week's rate movements, see the original report at Australian Broker.