Australian investment loan rates are undergoing some of their most important changes yet. Major banks predict the cash rate will drop to 3.35% by the end of 2025. This shift marks a significant turnaround from recent years and creates new opportunities for property investors nationwide.



The first rate cut since 2020 came in February 2025, when the cash rate dropped to 4.10%. This has completely reshaped the investment property scene. Australia's median home price reached a record high of $805,000 in April 2025, indicating a competitive market that remains heated. The trimmed mean inflation has now returned to the RBA's target band at 2.9% per year. These developments suggest that investment loan rates across Australia will continue to fall. Some experts predict possible cuts of 100 basis points by August 2025.

These changes could affect your investment strategy substantially. Property owners with a $600,000 mortgage could gain an extra $340 monthly in disposable income from a 1% rate reduction. Their borrowing power could also increase by up to 10%. Westpac’s forecast shows national house prices growing by 3% in 2025 and 7% in 2026. Understanding investment loan rates is now a vital factor to maximise your property portfolio’s performance.

What’s Happening with Investment Loan Rates in 2025

The Reserve Bank of Australia (RBA) has revolutionised the investment loan landscape for 2025. The central bank kept rates steady for a while but is now taking a more supportive approach, altering the map for property investors nationwide.

Recent RBA Decisions and Rate Cuts

A new chapter in Australia’s monetary policy started when the RBA slashed the cash rate to 4.10% in February 2025 — the first cut since November 2020. The board made another move in May with a 25 basis point reduction, bringing the official cash rate down to 3.85%.

Economists believe this downward trend will continue through 2025. The cash rate might settle between 3.35% and 3.50% by year-end, much lower than the peak rates we saw in late 2023. Major and second-tier lenders have already started offering lower investment property loan rates in response.

Why the RBA is Shifting to a Growth-Focused Policy

The RBA has succeeded in controlling inflation and is now aiming to boost economic growth. The trimmed mean inflation rate dropped to 2.9% per annum, which fits neatly within the RBA’s target band of 2–3%. This success allows the board to focus on broader economic goals.

Key reasons for the shift:

• GDP expansion lags behind the long-term average
• Unemployment climbed above 4.0% for the first time since 2022
• Previous rate hikes are still squeezing household spending

RBA board minutes show the focus is now on supporting growth while keeping inflation indicators in check.

How Investment Loan Rates Differ from Owner-Occupier Rates

Looking at investment loan rates in Australia, you’ll notice they remain higher than owner-occupier rates, even in 2025, as rates trend downward.

• Variable investment loan rates run about 0.4–0.6 percentage points above similar owner-occupier products.
• Fixed-rate investment loans (e.g. two-year fixed) cost 0.5–0.7 percentage points more.
• Interest-only loans, favoured by many investors for tax reasons, usually cost 0.8–1.0 percentage points more than principal-and-interest loans.
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This premium reflects perceived risk and regulatory requirements from APRA.

What the Big Banks Are Predicting for the Year Ahead

Australia’s major banks have updated their forecasts for investment loan rates in 2025, offering insight into what lies ahead for property investors.

CBA’s Quarterly Cut Forecast

CBA expects quarterly cuts throughout 2025, bringing the cash rate to 3.35% by December. Property investors could save $122.32 monthly on principal and interest repayments for an average loan of $764,495. CBA suggests this gradual easing gives investors time to adjust.

Westpac’s Expected Rate Path

Westpac agrees with CBA’s 3.35% target by year-end but predicts cuts in May, August, and November. Their chief economist urges investors to “lock in” the May cut. Westpac also forecasts a 3% rise in property prices in 2025 and 7% in 2026, creating favourable investment conditions.

NAB’s Aggressive Easing Strategy

NAB takes the boldest approach. It forecasts five cuts, including:

• A 50-basis-point drop in May
• Followed by four 25-basis-point cuts (July, August, November, February 2026)

This would take the cash rate to 2.60% by early 2026. Their chief economist suggests the RBA “act quickly and boldly.”

ANZ’s Cautious Approach

ANZ is the most conservative of the big four. It predicts three cuts by August 2025, bringing the cash rate to 3.85%. This cautious outlook follows global economic events, such as recent US tariff announcements.

How These Forecasts Affect Investor Planning

While the banks differ in timing, all agree that multiple rate cuts are on the way. This outlook presents both opportunity and complexity for property investors.

• New investors may want to wait for cuts to increase affordability.
• Experienced investors might act early to get ahead of the competition that typically follows rate drops.

How Lower Rates Impact Property Investors

Falling investment loan rates are already reshaping decisions for investors in 2025.

Effect on Borrowing Capacity

Each 0.25% drop in interest rates increases the average borrowing capacity by $18,347. This enables access to higher-value properties or the ability to expand a portfolio, though serviceability buffers still apply.

Changes in Monthly Repayments

A typical $764,495 investment loan at 6.06% saves $116.20 per month following a 0.25% rate cut. For million-dollar loans, that’s over $230 in savings. More than 30 lenders have passed on the full May cut to borrowers.

Opportunities for Refinancing

Investor refinancing hit a record 173,948 loans by March 2025. Internal refinancing increased by 33%. With many lenders offering more competitive rates in response to RBA cuts, refinancing gives investors a chance to:

• Switch to interest-only loans
• Split loans between fixed and variable rates
• Free up cash flow

Impact on Rental Yield and Cash Flow

Lower repayments improve cash flow, but rising property values may reduce rental yields in stagnant rent areas. Regional markets — like Wagga Wagga with 5.75% unit returns — often outperform capital cities.

Risks of Over-Leveraging in a Low-Rate Environment

Despite the appeal of cheaper finance, investors must be cautious when borrowing above 80% LVR. Market shifts and future rate rises can quickly strain highly leveraged portfolios.

What to Consider Before Taking an Investment Loan in 2025

Fixed vs Variable Investment Loan Options

• Fixed loans offer stability, making it easier to match repayments to rental income.
• Variable loans allow flexibility, often with features like offset accounts and extra repayments.
• Split loans (e.g. 60/40) are becoming popular as they balance security with adaptability.

Understanding Serviceability Buffers

Lenders assess affordability using a 3% serviceability buffer. For example, if your actual rate is 6%, you must qualify at 9%. 

How to Compare Investment Property Loan Rates

Beyond interest rates, compare:

• Upfront and ongoing fees (some may be tax-deductible). When lenders advertise interest rates, they must include a comparison rate that incorporates all the costs of the loan.
• Loan-to-value ratio (LVR) rates are best under 60% LVR
• Features like offset accounts, redraw options, and repayment flexibility

Timing Your Purchase in a Rising Market

CoreLogic predicts any property downturn will be “shallow and short-lived.” Acting before future rate cuts could allow you to secure a property before competition and prices increase further.

Partner with a Mortgage Broker Who Understands Property Investment

Whether you’re looking to expand your portfolio, refinance, or explore new lending options, Synergy Mortgage Brokers is here to guide you.

We work with a wide panel of lenders to help you access competitive investment loan rates tailored to your goals. Our expert brokers provide clear, strategic advice so you can make confident decisions without the stress.

Let’s talk about how to make your next property move a profitable one.

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