(Sources: REA & Reserve Bank of Australia)
Economists and markets were broadly expecting the RBA to cut the official cash rate to 3.60%, which would ease pressure on mortgage holders and potentially stimulate borrowing and spending.
However, the decision to pause could actually be good for buyers, according to REA Group senior economist Anne Flaherty, who noted rate cuts tend to push home prices up.
“Yesterday’s decision to hold could be considered bad news for mortgage holders on variable interest rates, but on the other hand, for those people who are yet to get into the property market and who are currently looking to buy, it’s not necessarily bad news,” Ms Flaherty said.
“We know that typically when interest rates are lowered, that can fuel upward growth in property prices.”
She said though some buyers might have had a knock to their confidence after the RBA announcement, there was a “strong chance” a cut would be delivered in August.
“If that happens, that might undo some of the nerves that have emerged from yesterday,” she said.
“For someone who buys now, by the time they settle, they might be able to get a lower interest rate anyway.”
Following Tuesday’s rates decision, Reserve Bank governor Michele Bullock said the board wanted to see the quarterly inflation numbers – to be released on 30 July – before making further cuts to the cash rate.
“Quarterly trimmed mean inflation has only been in our 2% to 3% target range for one quarter,” Ms Bullock said.
“We’ve already cut the cash rate by 50 basis points since February this year, the effects of which are still to flow through to the economy.”
She indicated August could bring with it lowered rates, though she was cautious not to give any guarantees.
“We don’t want to end up having to fight inflation again, we want to make sure we’ve nailed it,” she said.
“Provided we stay on track with our inflation, which that’s what we’re looking to do, then there is opportunity for interest rates to come down.”
Ms Flaherty said though the July decision was a shock, buyers and mortgage borrowers alike should not dismiss future predictions of an August cut.
“It’s not if it’s when,” she said. “We said there was a really good chance of July, but I still think there’s a really good chance of a cut in August. So for those mortgage holders who are struggling, hang in there because there is still a very strong chance we will see interest rates move within the foreseeable future.”
A quick recap of the July 2025 decision
On 9 July 2025 the Reserve Bank of Australia (RBA) left the cash‑rate target unchanged at 3.85 per cent, marking its second consecutive “pause” after a quarter‑percentage‑point cut in June. The Board’s accompanying statement noted that the current setting remains “restrictive” enough to guide inflation back to the 2–3 per cent band while giving earlier rate moves time to work through the economy.Reserve Bank of Australia
Why did the RBA decide to hold?
Although headline inflation has slowed from its 2023 peak, underlying price pressures—especially in services—are proving sticky. Wage growth is still running above the decade average, and rents continue to climb. At the same time, consumer spending and building approvals have weakened, suggesting higher borrowing costs are biting. Balancing these cross‑currents, the Board judged that keeping rates on hold would sustain disinflation without unduly damaging growth or employment.Reserve Bank of Australia
The immediate takeaway for borrowers
If you are on a variable‑rate home loan, your lender’s reference rate is unlikely to change this month. A cash rate of 3.85 per cent typically translates to owner‑occupier variable mortgage rates in the high 5 per cent range and investor rates a little higher. The stabilisation should offer short‑term breathing space for households that have absorbed more than 400 basis points of cumulative tightening since 2022. However, because many banks price loans with a margin above the cash rate, even a pause keeps repayments elevated relative to pre‑tightening years.
Homeowners: how much are you really saving?
For a typical $600,000 loan with 25 years remaining, each 25‑basis‑point move in the cash rate shifts monthly repayments by roughly $100. Compared with a scenario in which the RBA had cut again in July, holding means that $100 stays in the bank’s pocket rather than yours. Conversely, the pause prevents any further increase. Fixed‑rate borrowers rolling off ultra‑low pandemic deals still face a “refinance cliff,” but July’s steady decision removes the risk of an additional step‑up for now.
Renters: will relief arrive soon?
Tight rental markets remain one of the economy’s most painful pressure points. Realestate.com.au data show that vacancy rates on the east coast sit near record lows, and advertised rents rose by more than 9 per cent over the past year.Realestate.com.au A rate hold keeps borrowing costs for investors stable, but because cash flows are already stretched by higher rates, few analysts expect an immediate surge in rental stock. Government incentives and targeted supply measures will be more important than monetary policy alone for easing rental stress.
First‑home buyers and upgrader sentiment
Two months of policy stability has already improved enquiry volumes on major property portals. Realestate.com.au research suggests that buyer sentiment lifts when rate expectations settle, even if rates remain relatively high.Realestate.com.au For first‑home buyers, servicing tests still assume a buffer above the actual rate, so affordability remains challenging. However, a pause signals that the worst‑case scenario of sharply higher repayments is receding, which may coax more would‑be entrants back to open homes in the spring selling season.
Investors: balancing yield and capital growth
Gross rental yields in most regional centres now sit in the mid‑to‑high 4 per cent range, slightly above average variable loan rates for investors. That modest “positive carry” is encouraging some investors to re‑enter the market, particularly in undersupplied cities such as Brisbane and Perth. Yet capital‑growth expectations are subdued: analysts at Realestate.com.au note that past rate‑cut cycles have boosted dwelling prices, but a static rate merely stabilises them.Realestate.com.au If the RBA resumes easing later this year—as some forecasters still expect—price momentum could accelerate.
Impact on new construction and housing supply
Developers rely heavily on debt finance; every 25‑basis‑point change meaningfully shifts project feasibility. While June’s cut lifted industry confidence, July’s hold means funding costs do not improve further. Housing Industry Association modelling cited by REA shows building approvals picked up after the June move, but the recovery remains fragile.Realestate.com.au Without lower rates or additional policy support, total dwelling completions in 2025 may fall short of federal supply targets, prolonging the structural shortage in many markets.
Savers and term‑deposit holders
For depositors, the pause means at‑call savings and short‑term term‑deposit rates will stay close to their recent peaks. Many banks are offering promotional six‑month deposits above 4½ per cent; locking in now hedges against the risk that rates fall later in the year. If you rely on interest income, shop around: smaller institutions and online‑only banks often pay higher margins than the majors, and the gap can add hundreds of dollars a year on a $50,000 balance.
What about inflation and the cost of living?
Holding at 3.85 per cent does not instantly cut grocery bills or power prices, but it signals that the Bank believes inflation is on track. Its latest forecasts still show CPI returning to 3 per cent by mid‑2026 under the current policy stance. Persistently high services inflation, however, means further action remains “on the table.” If price growth surprises on the upside, the RBA may hike again. Conversely, a downside inflation surprise or a sharper‑than‑expected slowdown in spending could open the door to another cut at the August or October meetings.
Practical steps you can take now
Revisit your budget while rates are stable. If you have a variable mortgage, channel any surplus cash into an offset account to reduce interest costs. Homeowners approaching the end of a fixed term should obtain refinance quotes early; lenders are competing aggressively for credit‑worthy customers. Prospective buyers can use the pause to gain pre‑approval and monitor stock levels, while investors should review rental yields and maintenance costs to ensure the numbers still stack up at a 3.85 per cent cash rate. Savers might ladder term deposits—placing portions of funds in differing maturities—to balance flexibility and yield.
The road ahead
Financial markets are currently pricing a roughly 60 per cent chance of at least one 25‑basis‑point cut by December, but the RBA insists its decisions will remain data‑dependent. Labour‑market conditions, wage negotiations and international energy prices will be critical inputs. A renewed upswing in global oil or a domestic wage‑price spiral could delay easing; a pronounced downturn in consumer demand could accelerate it. Keeping informed about each monthly statement—and understanding how it flows through to your wallet—remains essential.
Final thoughts
The July 2025 decision to hold the cash rate at 3.85 per cent neither delivers the extra relief many borrowers hoped for nor the pain additional hikes would have inflicted. Instead, it offers a period of relative stability in which households, investors and businesses can adjust to the higher‑for‑longer environment. By reassessing budgets, exploring competitive loan and deposit products, and staying alert to signals from both the RBA and the property market, you can position yourself to benefit—whatever the Board’s next move may be.