1 year on: cash rate to hold at 4.35%, as home loan rates tumble

The Reserve Bank of Australia is today expected to keep the cash rate steady at 4.35 per cent, marking a gloomy one-year anniversary for households. 

The RBA might be set on a holding pattern for now, however, a flurry of lenders have been slashing variable home loan rates as competition in the market heats up and expectations of cash rate cuts rise.

RateCity.com.au research shows:

• Around 70 lenders have cut at least one variable home loan rate in the past 12 months, including two of the major banks – CBA and NAB 
• 34 banks have at least one variable home loan under 6% 
• One of the lowest ongoing variable rates for owner-occupiers is 5.75%.

Borrowers should not wait for a rate cut to come to them

For borrowers who have had their home loan for more than a year or two, chances are they are on a higher interest rate than someone who has refinanced. That’s because many lenders reserve their lowest rates for new customers. 

RateCity.com.au analysis shows an owner-occupier with a $500,000 loan balance today, could potentially save $12,315 over the next two years by refinancing to one of the lowest variable rates on the market, even after factoring in switching costs. 

Potential savings from refinancing to one of the lowest variable rates

Based on a $500,000 loan with 25 years remaining

Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining. Assumes mortgage rates move in line with ANZ's current cash rate forecast. Refinancing option includes an estimated $1250 in switch fees. Does not include ongoing fees.

RateCity.com.au money editor, Laine Gordon, said: “The cash rate has been stuck in neutral for almost a year, however, variable home loan rates have started to drop.”

“In the past year, around 70 banks have lowered at least one variable home loan rate, but not all customers will have had a rate cut,” she said. 

“It’s a timely reminder to check your home loan rate and compare it to what your bank is currently offering new customers. If you are being taken for a ride, then now is the time to do something about it.

“By all means haggle, but consider making the switch. The sharpest rates are typically reserved for new customers, no matter how good your negotiating skills are, so it’s worth considering refinancing.

“If you are thinking of switching lenders, firstly do a quick check of how much equity you have in your loan because this is often crucial in understanding your options. If you’re an owner-occupier and own at least 20 per cent of your home already, then you’re in the box seat when it comes to rates. Use it to your advantage.

“There are now 34 banks on the RateCity database with variable rates under 6 per cent, so if you haven’t refinanced your home loan in a while there’s a good chance you’re paying more than you should be. Switching could save you thousands of dollars,” she said.

Lowest variable rates on the RateCity.com.au database

Source: RateCity.com.au. Note: excludes introductory and green loans. ^Discounted for the first 2yrs. *Includes Border Bank & Bank of Heritage Isle.

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