Why do we have to wait for the rate reduction?

The RBA announced yesterday afternoon that it was reducing the official cash rate by 0.25 basis points.

Immediately after the RBA announcement, many banks were quick to confirm that they had matched the RBA 0.25 cash rate reduction and passed this on as a discount on their customers variable rates.

This reduction was widely predicted and warmly received by home loan customers.

However, in announcing their new rate reductions, many banks have confirmed that these will not come until the week starting the 21 August. Indeed, the following dates apply for our big banks to pass on the reduced rate following the RBA announcement:

ANZ 22 August 2025 (10 days)

CBA 22 August 2025 (10 days)

NAB 22 August 2025 (10 days)

Westpac 26 August 2025 (14 days)

ING 26 August 2025 (14 days)

Bankwest 22 August 2025 (10 days)

AMP 22 August 2025 (10 days)

The outlier with regards to effective date is Macquarie Bank:

Macquarie Bank 15 August 2025 (3 days)

It is the bugbear of many home loan customers is that the rate reductions aren't immediate. And to this end, there has never been a clear answer.

Historically, the banks have always had a delay for their new reduced rates to come into effect. This can vary from 10 days on average to a couple of weeks.

In reality when the cash rate reduces, the banks have to pay less interest to borrow from other banks in providing loans to their own customers.

The argument often presented by lenders is that it takes time for the rate to flow through in the banks operations to the customer. External pressures can also dictate when a bank decides to pass on the rate. A bank doesn't want to see uncompetitive in passing on the rate, compared to its major competitor/s.

The sceptic may also argue that banks may wish to delay the rate cut purely as a strategy to benefit the bottom line.

Whatever the reason, history continues to show up that there is a delay in this being passed on to customers. Yesterday's announcement was no different.

For those currently applying for a home loan or refinancing, the benefit of the reduced rate will flow through to current applications immediately. This is a win for customers particularly where they might be tight on how much they can borrow as lower rates increase how much customers can borrow.

Regardless of the timing the interest rate reduction, it is important for existing home loan customers to check whether this rate reduction will reduce their interest rate automatically. Some banks will keep repayments the same unless a customer indicates that they want their repayment to reduce in line with the rate reduction. Other banks will automatically apply the rate reduction to repayments.

Not all home loan customers want to reduce their repayments but would rather benefit from the lower interest rate by keeping their repayments the same. Make sure your bank is making the change that you want.