What the August 2025 RBA Interest Rate Cut Means for Commercial Borrowing 310

1. The Link Between the Cash Rate and Commercial Loan Rates
In August 2025, the Reserve Bank of Australia (RBA) cut the official cash rate by 0.25% to 3.6% — the third rate cut this year.

As Cameron Wicking from Mike Phipps Finance explains, the RBA’s cash rate is closely linked to the Bank Bill Swap Rate (BBSW), which is the benchmark most commercial loans are based on. When the cash rate falls, the BBSW usually follows — and so do variable commercial lending rates.

The reason is simple: banks fund themselves partly through short-term markets, and the BBSW reflects the cost of that funding. Lower funding costs mean banks can reduce rates for borrowers, particularly on loans that can be repriced quickly.

2. What Is the BBSW and Why Does It Matter?

The BBSW (Bank Bill Swap Rate) is what’s known as a market reference rate — it’s calculated from actual transactions between banks and is considered a reliable measure of short-term funding costs. Banks use it as a base to price business loans, commercial property finance, and other debt securities.

So, when the RBA reduces the cash rate, that effect flows through to the BBSW and ultimately to your loan repayments — especially if you have a variable rate.

3. What Is the BBSW and Why Does It Matter?

The RBA lowered rates in response to easing inflation and a softening labour market, with unemployment sitting around 4.3%.

The aim? To stimulate the economy by making it cheaper for households and businesses to borrow and spend. When borrowing costs drop, businesses have more cash on hand — which they can invest in stock, hire more staff, expand operations, or even pass savings on to customers.

4. Commercial vs Residential Impact

Australia’s residential property market is worth about $11.6 trillion with $2.4 trillion in mortgage debt. By comparison, the commercial property market is smaller at $1.3 trillion — but changes in borrowing costs still matter significantly.

Just like households benefit from lower mortgage repayments, businesses benefit from lower commercial loan repayments — freeing up cash flow for growth or cost reduction.

5. A Word of Caution

While a rate cut might seem like unqualified good news, it’s important to remember why rates are cut in the first place.

If rates are falling because inflation is slowing, that could mean people are spending less. This slowdown in demand might impact your business more than the savings you make on loan repayments.

In short — use the savings wisely and keep a close eye on broader economic conditions.

6. Bottom Line for Business Owners

If you have a variable-rate commercial loan, expect to see your repayments drop soon.

Lower interest costs can mean better cash flow — but plan carefully where you direct that extra money.

Whether you’re looking to expand, reduce debt, or reinvest in your business, our specialists can help you make the most of these savings.

References

Core commentary and analysis from Cameron Wicking, Mike Phipps Finance (shared directly).

Australia’s central bank cuts rates to two-year low of 3.60% – Reuters, 12 August 2025.

Australia's central bank cuts interest rate for third time this year to 3.6% – AP News, 12 August 2025.

Bank stocks tumble as ASX 200 rally shows signs of weakness – The Australian, 13 August 2025.

Property and lending figures sourced from Mike Phipps Finance market commentary.

Make informed decisions and secure a thriving investment today with CRE Brokers - Contact Us today to discuss your investment aspirations.