Variable mortgage rates set to fall below 3 per cent


Liz Seatter

Liz Seatter

Jul 2, 2019( 4 min read )

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Tuesday 2 July 2019: Variable rates could fall as low as 2.84 per cent following the Reserve Bank’s decision to cut the cash rate to yet another historic low.

If banks pass on today’s cut in full, it will translate into savings of $58 a month, that’s $692 a year for the average mortgage holder.

If the average mortgage holder is lucky enough to get a 0.50 per cent cut over June and July they will save up to $116 a month or $1389 a year.

Keep across the changes with RateCity’s live list of who is cutting, by how much and when.

Don’t bank on a full cut

RateCity.com.au research director Sally Tindall said a lot of banks will think twice before passing on this second rate cut.

“The RBA and the Treasurer have made it abundantly clear they want these cuts passed on to mortgage holders, but banks are getting jammed between the competing interests of borrowers, depositors and profit margins,” she said.

“The reality is, a lot of variable rate customers might find they get short-changed by their bank on the back of today’s cut.

“Call your bank and find out what they intend to do. If you’re an owner-occupier paying down your debt, and you’re on a rate higher than 3.50 per cent after this cut, you might not be getting value for money,” she said.

An opportunity to get ahead

Today’s rate cut, whether it is passed on in full or not, will be a chance for some borrowers to get ahead on their loan.

RateCity.com.au analysis shows if the average mortgage holder on a rate of 3.50 per cent put $58 a month back into their loan, they could save almost $15,000 in interest and shave up to 1 year, 7 months off a 30-year home loan.

“Australia’s household debt to disposable income ratio remains at a record high. This second rate cut is a chance for the nation to start chipping away at the mountain of debt casting a shadow over our economy,” she said.

Impact of 0.25% July rate cut

July cut (-0.25%)

Loan Amount

Monthly savings

Annual savings

$300,000

-$43

-$519

$400,000

-$58

-$692

$500,000

-$72

-$866

$600,000

-$87

-$1,039

$750,000

-$108

-$1,298

$1,000,000

-$144

-$1,731

Based on a 0.25% rate cut on RateCity.com.au’s current average rate of 4.14% for owner-occupiers paying principal and interest over 30 years.

Impact if both June and July rate cuts are passed on in full 

0.50% cut (June and July)

Loan Amount

Monthly savings

Annual savings

$300,000

-$87

-$1,042

$400,000

-$116

-$1,389

$500,000

-$145

-$1,736

$600,000

-$174

-$2,083

$750,000

-$217

-$2,604

$1,000,000

-$289

-$3,472

Based on a 0.50% rate cut on RateCity.com.au’s previous average rate of 4.31% for owner-occupiers paying principal and interest over 30 years.

How to ensure you get a rate cut

  1. Call your bank and ask them whether they are cutting your rate, by how much and when.
  2. Check what other lenders are offering. Even if your bank is passing on the cut, you might find a better deal from a competitor.
  3. If your bank doesn’t pass on the cut in full, or you discover you’re paying too much, consider switching. The beauty of a variable home loan rate is that you’re well within your right to take your business elsewhere.

How to put a rate cut back into your home loan

  1. Find out if your bank is passing on the rate cut, and by how much.
  2. Work out what your new monthly repayments will be and what this means for your budget.
  3. If you decide to put that money back into your mortgage, call your lender up and ask them to keep your monthly repayments the same.
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