The Reserve Bank of Australia (RBA) has reduced the official cash rate by 0.25% to 4.1% at its first meeting of 2025, marking the first rate cut since November 2020.

The decision is expected to increase borrowing capacity for home buyers and provide some relief to mortgage holders.

In anticipation of the move, several major banks had already adjusted fixed rates, with Westpac cutting its variable rate by 0.4% ahead of the announcement.

This marks the first change in interest rates since November 2023, when the RBA raised the cash rate to 4.35%.

According to Canstar, the rate cut will reduce weekly mortgage repayments by $92 for a $600,000 loan and by $115 for a $750,000 loan, improving affordability for borrowers.

Leading banks, including NAB, Westpac, Commonwealth Bank, and ANZ, have confirmed they will pass on the full rate cut. However, implementation may take up to two weeks for some lenders.