For the first time in over four years, the Reserve Bank of Australia (RBA) has cut the cash rate, paving the way for banks to lower interest rates. After another tough year of economic challenges, mortgage relief can’t come soon enough. For those considering ways to boost their mortgage, we’ve got some tips to help you stay ahead and save.
Mortgage relief with interest rate cuts
The Reserve Bank of Australia (RBA) has lowered the cash rate by 0.25%, bringing it down to 4.10%. This is the first rate cut since 2020.
Major banks like Commonwealth Bank, Westpac, NAB, and ANZ have already announced they will pass on the full 0.25% reduction to customers with variable-rate mortgages.
For a homeowner with a $600,000 loan, this means monthly payments could decrease by about $92. The changes will take effect on February 28, 2025, for CBA, NAB, and ANZ customers, while Westpac customers will see the reduction starting March 4, 2025.
However, not all smaller banks may pass on the rate cut to their customers. To understand how a rate change could affect your mortgage repayment, get in touch with your mortgage broker or lender.
Using falling interest rates to supercharge your mortgage
If you can afford to keep your mortgage repayment amounts the same, saving the extra funds could help you pay down your mortgage faster and shave years off your mortgage.
For example, if you have a $550,000 home loan over 30 years, at 6% your repayments would be $3,297.53 per month. If your interest rate fell to 5.5%, your repayments would decrease to $3,122.84, saving you $174.69 a month.
If you kept your repayments at $3,297.53 per month, applying the $174.69 to your loan, you’d shave off nearly 3 years of mortgage repayments, and save just over $52k in interest!
It’s a simplified example but it illustrates just how powerful extra repayments can be.
Other loan features that boost your mortgage
An offset account and a redraw facility are two loan features that can reduce the amount of interest you pay.
Offset accounts are linked to your mortgage, while a redraw facility is a home loan feature. Both allow you to make extra repayments into your mortgage and redraw the extra funds when you need to.
Interest is calculated on your balance, so making extra repayments reduces your balance and the amount of interest you pay.
Another way homeowners can manage their mortgage is by splitting it between fixed and variable interest rates. Fixing part of your mortgage means your repayments don’t change when interest rates fluctuate. That can help you budget better.
Leaving some of your mortgage on a variable interest rate gives you more flexibility to make extra repayments. Your repayments will go down when interest rates drop. A mortgage broker can help determine the right split for you.
Insider knowledge and expert advice
Interest rate cuts aren’t the only way to get ahead. Refinancing your mortgage could mean getting a better interest rate with lower repayments. It’s worth reviewing your mortgage to see how it compares with rates on offer from other lenders.
Get help refinancing an existing mortgage or mortgage advice to take advantage of interest rate cuts.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
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