What the latest rate cuts mean for borrowers

This time last year, refinancing activity across the home loan market was notably subdued. But 2025 has brought a very different story.

“Borrowers do have a choice. With cost-of-living pressures remaining, some may opt to reduce their repayments to free up cash in the short term. This decision will depend on each person’s individual circumstances.” - Shannon McMahon

Following the Reserve Bank of Australia's (RBA) cash rate adjustment in February, we’ve seen a significant uptick in refinancing interest. ANZ’s March refinance applications surged by nearly 20% on the prior month. We also saw a smaller increase in new loan applications.

Across the industry, refinance values have grown by 30–40% year-on-year, with volumes up by 20–30%, according to the ABS Lending Indicators (Mar-25). This means we’re not only seeing more people refinancing, we’re also seeing an increase in the average loan size.

What’s Driving the Momentum?

The RBA’s latest cash rate cut on May 20 has further boosted refinancing appetite. Owner-occupiers are currently leading the charge with ABS data showing they're refinancing slightly more than investors.

With at least one more cut to the cash rate expected later this year and mortgage serviceability improving as rates trend down, many customers are starting to consider whether their current loan still meets their needs. We expect this elevated activity to continue through the remainder of 2025.

What a Rate Cut Means for Your Home Loan Repayments

We know that our customers welcome a decrease in their variable home loan interest rates, but what does that really mean for borrowers?

A rate cut doesn’t always translate to lower repayments. When ANZ reduces a customer’s variable interest rate, repayments remain unchanged by default. This means customers pay less interest and more principal with each repayment —helping them to pay off their loans faster and potentially save thousands of dollars over the life of the loan.

However, borrowers do have a choice. With cost-of-living pressures remaining, some may opt to reduce their repayments to free up cash in the short term. This decision will depend on each person’s individual circumstances, whether the priority is long-term savings or immediate financial relief.

To help navigate these decisions, tools like ANZ’s repayment calculator and the government’s MoneySmart website offer valuable insights into how changes in interest rates affect repayments.

Shannon McMahon is Managing Director of Home Loans at ANZ