Will Interest Rates Drop in August? – August Rate Report

August is in full swing, and the cash rate looks ready to drop, with inflation at a four-year low. However, we’ve been here before, just one month ago when the cash rate was almost certain to drop, and instead the Reserve Bank of Australia decided to keep it on hold, shocking many. The question on all our lips is “Will interest rates drop in August?”.

We can breathe a sigh of relief. The cash rate is trending downward, with a cut of .25 percentage points, bringing it to 3.60%. Inflation is currently at 2.1%—comfortably within the RBA’s 2–3% target band, supporting the case for a cash rate reduction.[1]

With the cash rate dropping, interest rates are expected to follow; however, borrowers should be aware that there’s no guarantee lenders will pass the savings on. We’ll be watching closely to see which lenders move first.

What Does This Mean for Homeowners?

If you’re on a variable rate, you could see a welcome decrease in your monthly repayments. For those coming off a fixed rate, now is an ideal time to speak with your local MoneyQuest broker. The rates on offer today are likely more competitive than those available since 2022.

Make sure your lender is passing on the savings. Not all will, and that’s where an annual home loan health check becomes invaluable in ensuring you’re not paying more than you need to.

What Does This Mean for Homebuyers?

Interest rates being on their way down is good news for borrowing power, meaning you may be able to borrow a little more in a highly competitive market; however, this extends for all borrowers. Historically, the cash rate being cut boosts buyer activity, pushing property prices up, and Cotality’s most recent HVI shows home values up across all capital cities, and record low vacancy rates [2], so while this is good news for buyers, expect heavy competition.

While cost of living pressures remain a factor in homebuying decisions, a rate cut could provide much-needed momentum and make the market more accessible to motivated buyers.[3].

Reach out to your local MoneyQuest broker for expert guidance and support when it comes to home-buying, refinancing, debt consolidation and more.

Will We See More Cash Rate Cuts?

The RBA still has three Monetary Policy meetings scheduled—in September, November, and December. While some have speculated the cash rate could drop as low as 3.05%, a more realistic outlook is one or two further cuts before year’s end.[4].

Here’s hoping we’ll see several cuts before the end of the year.

[1] Evershed, Commins. Inflation is down but prices remain high: when will the cost-of-living crisis end?   The Guardian 5th August 2025. Viewed 12th August 2025

[2] Cotality. Home Value Index August 2025 1st August 2025, Viewed 12th August 2025.

[3] Ittimani, L. RBA interest rate cuts expected to drive home-buyer activity but economists doubtful of ‘boom market’. The Guardian 19th May 2025. Viewed 12th August 2025.

[4] RBA  Statement by the Reserve Bank Board: Monetary Policy Decision. 6th August 2024. Viewed 12th August 2025.

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