How to bank the latest RBA interest rate cut and save thousands


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With the RBA cutting the cash rate for the third time this year it's time for mortgage customers to get busy.

While you could sit back and hope your current lender passes on the rate cut in full, taking charge and seeking out a better deal instead could see you shave thousands off your annual home loan repayments.

If passed on in full the latest cut could see the average variable home loan rate drop to 3.65%, down from 3.90% last month. In dollar terms this could see you $57 a month better off on average on a $400,000 loan for an owner occupier paying principal and interest.

While this saving is not to be scoffed at, the real money to be saved is by comparing your current home loan rate with those offered by smaller non-bank lenders.

Although you might not have heard of Homestar, Athena and Reduce Home Loans, they currently offer some of the most competitive variable interest rates in the market.

The fact is each official rate cut offers an opportunity to compare loans and reduce your repayments.

For example, ditching a Big 4 bank and switching to the best online lender rate could shave well over 100 basis points off your home loan interest rate and save you close to $5,000 a year on a 25 year loan. So don't sit back and hope your current lender does the right thing by you, start comparing and see if you can bank a saving.

Financial comparison site found online lenders have remained between 48 and 68 basis points cheaper on average than the Big 4 since 2014. While this should be enough motivation to get all mortgage customers heading online the vast majority still bank with the Big 4.

If the RBA continues to cut interest rates there will come a point where the Big 4 banks might struggle to pass on rate relief to their customers. This will effectively open the door for online lenders to significantly increase their market share by continuing to set record low variable and fixed home loan rates and widen the gap to the Big 4 even further.

Interestingly, the physical branch networks that once offered the big banks a competitive advantage are now contributing to their higher cost structures, which as official interest rates approach zero per cent, reduces their ability to cut rates inline with more agile online only rivals.

So, if you are looking to cut your loan repayments as soon as possible, it pays to compare rates and switch to the lender offering the most competitive rate you can find. When it comes to some of the best variable home loan rates on the market, Mozo found online lenders are on top with Homestar now offering 2.74%, Athena offering 2.84% and Reduce Home Loans offering 2.89%.

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Tom Godfrey is head of media and consumer advocate at

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