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With the lowest cash rate in history, is now the time to switch home loans?

The Reserve Bank of Australia (RBA) has cut the nation’s cash rate to an historic low of 0.75%. As a result, lenders have been cutting rates left, right and centre.

With some home loan rates starting lower than 2.99%, switching lenders now could end up saving you thousands.

What is the cash rate, and why does it change?

Put simply, the cash rate is the interest rate that banks charge on overnight loans to one another. They use these loans to access the cash they need to provide financial services.

Eleven times a year, the RBA board meets to decide if Australia’s cash rate should stay the same, increase or decrease.


Imagine a major bank needed to borrow $2000 to meet larger than expected demands for cash from customers. They can borrow this money from another bank overnight, and return it in the morning with interest.

If this happened today, with the cash rate now at an historical low of 0.75%, this bank would need to pay only $15 in interest on this loan.

How does the cash rate affect me?

With a low cash rate, banks owe less interest on overnight loans. When at less risk of running out of cash, banks can feel more secure in their lending, and vice versa.

This makes the cash rate one of many factors that affect home loan interest rates. If the RBA raises the cash rate, banks often raise their variable interest rates as well, meaning home loans cost more. But when the RBA cuts the cash rate, many banks pass this cut on to their home loan customers, making mortgages cost less.  

In 2019, the RBA cut Australia’s cash rate three times, taking it from 1.50% in May down to 0.75% in October – the lowest cash rate in the nation’s history. As a result, many large and small banks have slashed their home loan interest rates.

If you’ve been planning to apply for a home loan, or to refinance your current mortgage, you may be able to enjoy much lower interest charges than you could have found less than a year ago.

How much could I save?

A rate cut of 25 points can make a big difference to the cost of your home loan repayments.

For example, if your home loan’s variable rate dropped 25 points from 3.91% to 3.66% in October 2019, here’s how much you could save per month or per year, based on the size of your loan:

Loan sizeMonthly differenceAnnual difference
$1 million$142$1706

Source: RateCity.com.au. Note: 3.91% is average home loan rate on RateCity database on 25 September. Assumes an owner occupier paying principal and interest over 30 years.

How can I get a cheaper home loan?

RateCity makes is simple to quickly compare home loan offers, so you can look for a mortgage with a lower rate that may save you money, and also suit your needs.

Here’s how it works:

  1. Tell us if you’re buying property or refinancing to get a cheaper rate
  2. Tell us if you want to live in the home as an owner-occupier or rent it out as an investment property
  3. Tell us the value of the property and how much you want to borrow
  4. We’ll search the RateCity database for home loan options that may suit your needs
  5. Select your preferred lender from the options we find
  6. Enter your contact details so a lending specialist can contact you

Remember that the cheapest home loan may not be the best option for your needs. It's important to compare the interest rates, fees, features and benefits of differest options before making a choice. 

Ready to find out how much you could save if you switch now?


Great website and easy to navigate! Made the whole process of finding a suitable home loan much easier. Would recommend.

Christine Ye

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A very useful site which clearly displays all the rates and fees so I can make an informed decision on which loan to pick. Also has a repayment calculator so I could see the real cost. Highly recommend.

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How much can you save if you switch now?

  • Quick, simple and free
  • Find low rates
  • Connect with top lenders

Takes less than 2 minutes. Obligation free.