Why an RBA rate cut could mean around $2,000 back in your wallet


Alex Ritchie

Alex Ritchie

May 28, 2019( 3 min read )

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It’s been almost three years since Australians saw a change in the Reserve Bank of Australia cash rate, but next month’s decision is looking likely to bring mortgage-holders some relief in the form of a rate cut.

Reserve Bank of Australia (RBA) governor Philip Lowe said recently the board “will consider the case for lower interest rates” at their next meeting on monetary policy.

In the last few years we’ve seen lenders move interest rates out-of-cycle, often increasing rates and putting greater pressure on Aussie families.

However, if the next rate decision is a cut, this could mean nearly $2,000 back into mortgage-holders’ pockets in one year alone.

RateCity crunched the numbers on the average owner-occupier and investor principal and interest rates on our database, and how much Aussies can expect to save in one month and one year if the full 25 basis point cut is passed on by their lender.

Potential average owner-occupier variable loan savings if RBA cuts rates

Loan size

Previous monthly repayments
(average rate of 4.31%)

New monthly repayments
(rate cut to 4.06%)

Savings per month

Savings over 1 year

$300,000

$1,507

$1,464

$44

$525

$400,000

$2,003

$1,944

$58

$700

$500,000

$2,498

$2,425

$73

$875

$750,000

$3,737

$3,628

$109

$1,312

$1,000,000

$4,976

$4,830

$146

$1,749

Source: RateCity.com.au database, ASIC MoneySmart Mortgage switching calculator. 

Notes: Rates based on average owner-occupier, variable, principal and interest rate on 30-year loan. Includes ongoing annual fee of $251.

Potential average investor variable loan savings if RBA cuts rates

Loan size

Previous monthly repayments
(average rate of 4.72%)

New monthly repayments
(rate cut to 4.47%)

Savings per month

Savings over 1 year

$300,000

$1,580

$1,536

$45

$538

$400,000

$2,100

$2,041

$60

$717

$500,000

$2,620

$2,545

$75

$896

$750,000

$3,920

$3,808

$112

$1,344

$1,000,000

$5,219

$5,070

$149

$1,792

Source: RateCity.com.au database, ASIC MoneySmart Mortgage switching calculator.

Notes: Rates based on average investor, variable, principal and interest rate on 30-year loan. Includes ongoing annual fee of $251.

What if my bank doesn’t pass on the rate cut? 

If you’re on a variable rate loan and the RBA cuts interest rates, but yours still stays the same, it might be worth considering giving yourself a rate cut.

You can do this in two ways. Firstly, go online and check what your bank is offering new customers. Then call up your lender and ask to speak to their customer retention specialist (as it’s their job to keep you happy) and ask them to match this lower new customer rate.

Secondly, look around at what other low rates other lenders are offering customers, and suggest that you’ll leave if they can’t discount your rate.

Thirdly, be prepared to move to one of those lower rate lenders. You’re well within your right to take your business elsewhere if your bank refuses to budge – especially after an RBA cash rate.

Just make sure you do your research around refinancing and any fees and additional costs associated before making the switch. If your projected savings look like they’ll outweigh the initial cost, this can be a competitive option if you’re unhappy with your current lender.

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