More relief: RBA drops cash rate to 3.85%

The Reserve Bank of Australia (RBA) has reduced the official cash rate by 25 basis points to 3.85% following its most recent board meeting on 20 May 2025.

This is the second rate cut this year. Since 2020 rates had only increased or held steady.

If banks and other lenders choose to pass on the rate cut in full, people with a $650,000 mortgage could save around $1000 a year on their repayments.

As of 4 March 2025, Canstar listed the average basic variable rate mortgage at 6.41% and the average 1 year fixed rate mortgage at 6.15%.

Will banks pass on the full rate cut?

Following the February 25 basis point cut, lenders, including the Big Four banks, passed on the full cash rate reduction to borrowers.

Have a mortgage? Contact your lender or visit their website to see if the RBA decision has affected your repayments.

ALP housing policies expected following election win

Central to the incoming Albanese Government’s agenda is an expansion of the "Help to Buy" scheme, a shared equity program designed to assist first-home buyers.

Eligible homebuyers could purchase a home using only 5% of the price as a deposit, with the government contributing up to 40% equity for new homes and 30% for existing properties.

Another election policy announced was the investment of $10 billion to construct 100,000 homes exclusively for first-home buyers.

What this could mean for homebuyers

Lower interest rates and government policies that support first homebuyers or people on low incomes could make the housing market more accessible.

However, with more potential buyers looking there could be more competition to secure properties on the market.

Learn more about support available for homebuyers in Australia and Victoria

Australian Government

Housing Australia – Home Guarantee Scheme

Housing Australia – Regional First Home Buyer Guarantee

Housing Australia – Help to Buy scheme

Housing Australia – Family Home Guarantee (single parents)

Housing Australia – Tools and resources

Treasury – Supporting people into home ownership

Australian Taxation Office – First home super saver scheme

Victorian Government

Housing Victoria – Home Ownership

Housing Victoria – Help to buy a home

State Revenue Office – Buying a property

State Revenue Office – Homebuyer Fund

State Revenue Office – First Home Owner

State Revenue Office - Apply for a first home buyer duty exemption, concession or reduction

Eligibility

Schemes and programs have eligibility criteria that determines how they can be accessed.

If you’re applying, please read the information from the relevant government department or agency carefully and seek assistance to understand your obligations if successful.

Government programs are subject to change and up to date information about the policies and programs should be sought directly from the organisation administering the policy.

Disclaimer

Grants subject to State Government eligibility rules. DFC makes no warranties or representations regarding eligibility rules or criteria for any government grants.The advice, opinions and insights of this article are general in nature and based on DFC’s analysis of current market trends and government policy as of the date of publication. This article does not take into account your personal financial circumstances or objectives and may not always be entirely accurate, complete or current. We recommend speaking to an independent legal or financial advisor before making any binding decisions.