RBA cuts cash rate for the first time in years. Here’s what it means for your mortgage.

Homeowners, take note – the Reserve Bank of Australia (RBA) has officially cut the cash rate to 4.10%, down 0.25%. This marks the first rate cut since 2020, and comes after months of the cash rate being held at 4.35%.

What does this mean for your home loan?

If you have a variable-rate home loan, expect your interest rate to drop—but don’t assume your lender will pass on the full cut automatically.

When the RBA cuts the cash rate, banks and lenders often follow suit. However, not all lenders may pass on the rate cut equally to all their customers. 

But following today’s announcement, the Big 4 have all announced they’ll reduce their variable rates by 0.25%, following the RBA’s decision. For a borrower with a $600,000 mortgage, this could mean savings of around $92 per month or more than $1,000 annually. 

What should you do next?

With more rate cuts expected, home loan borrowers could see further relief in the coming months. However, waiting for additional cuts doesn’t guarantee immediate savings. Lenders don’t always pass on the full reduction, and existing borrowers often pay higher rates than new customers.

• Compare lenders – Some lenders will offer sharper rates than others.
• Talk to a broker – They can help negotiate a better deal or help you refinance.
• Consider refinancing – If you’re on a ‘loyalty tax’ rate, switching could save you thousands.

A mortgage broker can help

Banks adjust their rates differently, with some offering more competitive deals than others. A mortgage broker can help you find the best possible rate for your situation and negotiate better terms. 

Many long-term customers unknowingly pay a loyalty tax, where they’re charged higher interest rates than new borrowers. As competition among lenders intensifies, reviewing your existing loan and comparing it to current market offers can help you avoid overpaying. Ensuring your mortgage is competitively priced means more savings for you—not extra profits for your bank..

What should I do with the savings?

The savings on your home loan put extra money back in your pocket. You could use it to cover day-to-day expenses, boost your emergency fund, indulge in a much-deserved treat, or—if you’re thinking long-term—get ahead on your mortgage and cut years off your loan. How you use it is up to you, but making the right choice now could mean even bigger savings down the track.

For example, if you have a $600,000 home loan and keep paying at the old rate instead of reducing repayments, you could:

• Pay off your loan 23 years and 9 months instead of 25 years.
• Own your home over a year earlier.
• Save thousands in interest over time.

Some tips to get ahead on your mortgage:

• Make extra repayments – Even small additional payments reduce interest costs.
• Use an offset account – Every dollar in  an offset account reduces the interest you pay.
• Refinance to a lower rate – Ensure you’re on the most competitive deal available.

Bottom line: Rates are heading down, but smart borrowers won’t just wait for savings to trickle in. Now’s the time to check your rate, refinance if needed, and take control of your mortgage.

Talk to a broker today and see how much you can save!