Surge in sub-6% home loan rates likely if cash rate drops this month
Variable mortgage rates below 6% may soon become standard, according to new estimates from rate-tracking firm Canstar, as speculation mounts over a potential Reserve Bank of Australia (RBA) cash rate cut on Tuesday.
Canstar forecasts that a 0.25 percentage point reduction in the cash rate could see more than 30 lenders advertise at least one variable rate below 5.50%. The lowest advertised rate may drop under 5.40%, and nearly all lenders in Canstar’s database — about 95% — could offer rates below the 6% threshold. The average existing owner-occupier variable rate would then fall to 5.81%.
Market competition has already driven change, with 15 lenders cutting variable rates since the start of April, following a previous RBA cut in February. The lenders adjusting their rates include Commonwealth Bank of Australia (CBA), Westpac Group, Bank of Queensland (BOQ), Newcastle Permanent, and Greater Bank.
At present, the most competitive variable rate sits at 5.59%. Thirty-five lenders are offering at least one rate below 5.75%, Canstar data shows.
The trend extends to fixed rates as well. Since April, 30 lenders have lowered fixed-term home loan rates. Major banks such as ANZ, NAB and Macquarie Bank are among those that have made adjustments. Some fixed rate products, including those from BOQ and Police Bank, now begin with a “four”.
All four major banks anticipate a rate cut from the RBA on Tuesday, with NAB forecasting a double cut, bringing the cash rate to 3.60%. ANZ updated its forecast on Friday, maintaining that a cut next week is “more likely than not”. While still predicting three cuts, the bank has revised the timing of the latter two from July and August to August and early 2026.
For a typical owner-occupier with a $600,000 mortgage and 25 years left on their loan, a 0.25 percentage point cut — if passed on in full — could reduce monthly repayments by $91.
“The mortgage market is buzzing with healthy competition, and this is just the start,” said Sally Tindall (pictured above), Canstar’s data insights director. “If there is a cash rate cut in May, we expect competition in the market to ramp further up as borrowers check in on their new rate and ideally compare it against the rest of the pack.
“If the cash rate drops to 3.85%, the average owner-occupier could see their variable rate fall below 6%, however, borrowers can do far better than this. We expect there’ll be more than 30 lenders offering at least one rate under 5.50%.
“All these rate changes are great news for Australians with variable home loans, but only if they take advantage of the competition. While the vast majority of banks should pass on the next cash rate cut in full to their existing variable customers, the reductions we’ve seen outside the RBA decisions are typically only reserved for new business or those prepared to lock in their rate.
“Borrowers should use the next few days to take stock of their interest rate and work out where it sits in the pack before a potential cash rate cut, and if need be, pick up the phone and haggle with their bank for a lower rate.”
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