What a RBA Rate Cut Could Mean For You

Could you be paying less on your home loan? Find out how much you could save!

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Will Your Bank Pass on the Full RBA Rate Cut?

While the Reserve Bank of Australia (RBA) is expected to cut the cash rate by 0.25% on February 18, there's no guarantee your bank will pass the full discount on to you. In fact, history tells us that lenders often retain part of the cut to protect their profit margins.

• Banks are not obligated to pass on the full RBA cut to customers.
• There is no requirement for lenders to notify you when they drop home loan rates.
• Lenders do not automatically lower your automatic repayments, in line with your new rate.
• Lenders may delay reductions or apply cuts selectively to different loan products.

So how do I find out if my rate has lowered?

The only way to know if you’re benefiting is to:

• Check your rate manually via online banking.
• Call your lender.

Banks rely on customer apathy to maintain higher profits. According to ASIC research, homeowners who have had their mortgage with the same lender for three or more years are, on average, paying 0.58% more than someone who has recently taken out a loan.

Why a Rate Cut Doesn't Always Mean a Competitive Loan

A lower interest rate doesn’t necessarily mean you have the best deal. Even if your bank passes on the full 0.25% cut, your mortgage rate could still be significantly higher than the market average.

• If your current home loan rate is 0.3% above the average, even after a 0.25% RBA cut, your rate may still be uncompetitive.
• Over a 30-year loan, even a small 0.3% difference could cost you tens of thousands of dollars.

How Refinancing Can Save You Thousands

If your bank isn’t offering you the best rate, refinancing could be your smartest financial move. By switching to a more competitive lender, you could slash your repayments and free up cash for more important things.

• Banks compete harder for new customers – you can leverage better deals.
• You could reduce your repayments instantly – more cash for savings, investments, or lifestyle upgrades.
• Pay off your home loan faster – keeping repayments the same on a lower rate means more of your money goes to the principal.

According to ASIC research, borrowers with the same lender for 3+ years pay, on average, 0.58% more than a newly settled loan. A 0.58% rate difference on a $500,000 mortgage can cost you over $2,900 per year in extra interest payments.