Australia’s economy is hitting the brakes, and if you’re a homeowner or thinking about buying, you’re probably wondering: What does this mean for my mortgage repayments?
With the Reserve Bank of Australia (RBA) weighing up its next move and the nation’s growth slowing to a crawl, there’s a lot at stake for anyone with a home loan.
Let’s break down what’s happening, what the experts are saying, and what it could mean for your hip pocket.
Australia’s economic slowdown: What’s going on?
The latest numbers from the Australian Bureau of Statistics show that our economy barely budged in the first three months of 2025. Gross Domestic Product (GDP) grew by just 0.2 per cent, a sharp drop from the 0.6 per cent rise in the previous quarter. In plain English: the economy is stagnating.
Treasurer Jim Chalmers tried to put a positive spin on things, saying ‘any growth is positive,’ but there’s no denying these figures are weaker than expected. The reasons? A perfect storm of natural disasters (costing the economy a whopping $2.2 billion), global uncertainty, and ongoing trade tensions—particularly those stemming from US President Donald Trump’s tariffs, which have made exporting and manufacturing more expensive.
What’s the RBA likely to do next?
The RBA’s job is to keep inflation in check while supporting economic growth. At its May meeting, the RBA cut the official cash rate by 0.25 per cent, bringing it down to 3.85 per cent. There was even talk of a bigger cut, but the board decided not to risk reigniting inflation.
Now, with the economy barely moving, financial markets are betting big on more rate cuts. There’s a greater than 90 per cent chance the RBA will cut rates again at its July meeting, and about a 70 per cent chance of another cut in August. By the end of the year, the cash rate could be as low as 3.1 per cent.
How will this affect your mortgage?
If you have a variable-rate mortgage, RBA rate cuts are generally good news. When the cash rate drops, banks usually pass on at least some of the savings to borrowers, meaning your monthly repayments could go down.
For those on fixed rates, you won’t see any immediate change, but lower rates could be on offer when it’s time to refinance.
Benjamin Picton, a senior macro strategist at Rabobank, says that while households are rebuilding their finances, they’re not spending much.
He believes that a few more rate cuts could boost consumer confidence and encourage people to open their wallets again.
Tony Sycamore, a market analyst at IG, points out that per capita GDP actually fell by 0.2 per cent last quarter.
He expects the RBA to cut rates by 0.25 per cent in July and again in August, which would bring the cash rate down to 3.35 per cent. That’s a significant drop from where we are now.
Why is the RBA being so cautious?
Despite the weak economic data, the RBA isn’t rushing to slash rates. Steven Wu, a senior economist at the Commonwealth Bank, says the RBA is likely to wait for more information, especially the next set of inflation (CPI) numbers, before making its move.
If the labour market shows signs of weakness, that could tip the balance towards an earlier cut.
Devika Shivadekar, an economist at RSM Australia, agrees that the RBA is likely to remain cautious, especially with global uncertainty and the lingering effects of recent natural disasters.
She expects the next rate cut in August, but says weak data could bring it forward to July.
What should homeowners and prospective buyers do?
If you’re already paying off a mortgage, keep an eye on your lender’s announcements after each RBA meeting.
Banks don’t always pass on the full rate cut, so it pays to shop around or negotiate a better deal. If you’re on a fixed rate, start thinking about your options for when your term ends—lower rates could be available.
For those looking to buy, lower interest rates can make borrowing more affordable, but remember that banks are also looking closely at borrowers’ ability to repay, especially in a slow economy.
It’s a good time to review your budget and make sure you’re comfortable with your repayments, even if rates rise again in the future.
The bigger picture: What does this mean for the economy?
Rate cuts are designed to stimulate spending and investment, but they’re not a magic bullet. If people are worried about job security or the cost of living, they may still hold back on big purchases.
The RBA will be watching closely to see if lower rates actually translate into more economic activity.
Have your say
Are you feeling the pinch from higher mortgage repayments? Would a rate cut make a difference to your household budget, or are you more concerned about job security and the rising cost of living? Have you recently refinanced, or are you considering it? We’d love to hear your thoughts and experiences—share your story in the comments below!
Also read: $294K mortgage insight before RBA rate shift: This could save you a fortune
