Australia’s official cash rate target will fall from 4.1 per cent to 3.85 per cent, a level it has not been at since May 2023.

For the average owner-occupier loan of $660,000, today’s rate cut equates to $213 in monthly savings or an annual saving of more than $2500.

In its monetary policy announcement, the RBA board noted that the current economic environment justified a reduction in the cash rate today, though future projections remain unclear.

“Given that inflation is anticipated to stay near the target, the Board concluded that easing monetary policy at this meeting was appropriate,” the statement indicated.

“The Board assesses that this move will make monetary policy somewhat less restrictive.

“It nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply.”

Graham Cooke, head of consumer research at Finder, said there was still a possibility that 2025 held two further rate cuts for households sweating on payment relief.

“Frankly, two cuts might not be enough to ease the spike in mortgage stress we’ve seen since the cash rate started rising again in May 2022,” he said.

“But it’s a step in the right direction and it’s great news for homeowners. It’s two down and maybe two more to go this year.

“On an average home loan, if your bank passes on both rate cuts in full, you could be saving almost $2600 per year.”

Today’s rate cut will likely fuel a rash of interest in auctions, with property data firm Cotality finding that many vendors were waiting for the central bank before listing their property.

“It seems that many vendors are holding out for the RBA’s interest rate decision this week,” Cotality Research Analyst Caitlin Fono said.

“The volume of scheduled auctions across the combined capitals is set to rise to around 2360 this week – a 29 per cent jump on last week, before rising further next week, to around 2700 auctions.”

Sally Tindall, Canstar data insights director, said the downside of today’s rate cut will come to those looking to enter the market by saving up a deposit.

“Cash rate cuts are a double-edged sword because while one-third of households have a mortgage, two-thirds of households have money in the bank as savings or are, at the very least, aiming to,” Tindall said.

“In the past month, we’ve seen dozens of banks cut term deposit rates as the banks price in the possibility of a rate cut.

“We’ve also seen some banks come through quietly and cut some of their key savings rates twice – that is, after the February RBA cut, but then again out of cycle.

“While term deposit rates above 5 per cent have now been relegated to the history books, at least for now, savers can still find rates above 5 per cent if they’re willing to jump through a few hoops each month to qualify.”