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How you can pay off your home loan faster
If your home loan lender is passing on a full or partial interest rate cut after the RBA slashed the official rate to 0.75 per cent, congratulations, not only are you one of the lucky ones but you now have the option to pay off your mortgage sooner.
By committing to the same monthly repayments instead of repaying less money every month, chances are you could shave months off your remaining loan term.
If your lender is passing on the full 0.25 per cent rate cut, you could potentially trim up to one year and seven months off your remaining loan term, according to RateCity data. As no one knows how interest rates could move in the future, this analysis is assuming the current rate will stay for the period of the loan.
While this is likely almost impossible, it's a good idea for homeowners to pay off more of their principal while the cash rate is low. It will mean that even when the rate hikes again; because that will likely happen - borrowers will still be better off.
How much sooner you can pay off your loan
Old rate | New rate after cut | Monthly repayment | Old remaining loan term | New remaining loan term | Time shaved off loan term |
3.91% | 3.66% (-0.25%) | $1889 | 30 years | 28 years and 5 months | 1 year and 7 months |
3.91% | 3.71% (-0.20%) | $1889 | 30 years | 28 years and 9 months | 1 year and 3 months |
3.91% | 3.76% (-0.15%) | $1889 | 30 years | 29 years and 1 month | 11 months |
*Note: 3.91% is the average September variable P&I, owner-occupier interest rate on the RateCity database. Assumes a mortgage balance of $400,000.
Alternatively, you can take advantage of the short-term savings, if you don't mind your current remaining loan term.
To find out how much your payment can be reduced, take a look at the table below, or consider using our mortgage repayments calculator.
Savings after full or partial rate cut
Old rate | New rate after cut | Monthly difference | Annual difference |
Mortgage balance $400,000 | |||
3.91% | 3.66% (-0.25%) | $57 | $684 |
3.91% | 3.71% (-0.20%) | $46 | $552 |
3.91% | 3.76% (-0.15%) | $34 | $408 |
Mortgage balance $500,000 | |||
3.91% | 3.66% (-0.25%) | $71 | $852 |
3.91% | 3.71% (-0.20%) | $57 | $684 |
3.91% | 3.76% (-0.15%) | $43 | $516 |
Mortgage balance $750,000 | |||
3.91% | 3.66% (-0.25%) | $107 | $1284 |
3.91% | 3.71% (-0.20%) | $86 | $1032 |
3.91% | 3.76% (-0.15%) | $64 | $768 |
Mortgage balance $1 million | |||
3.91% | 3.66% (-0.25%) | $142 | $1704 |
3.91% | 3.71% (-0.20%) | $114 | $1368 |
3.91% | 3.76% (-0.15%) | $85 | $1020 |
*Based on a 30-year loan term.
Which banks and lenders are passing on the rate cut?
Not all lenders have chosen to pass the rate cut on to their customers, so consider yourself lucky if your lender has lowered rates in response to the RBA's October decision.
Here's a list of the lenders sharing the benefits of this week's rate cut.
Lender | Rate change | Lowest variable rate |
Athena | 0.25% | 2.84% |
Auswide Bank | 0.25% | 3.24% |
Freedom Lend | 0.25% | 2.79% |
Homestar | 0.25% | 2.74% |
Liberty | 0.25% | 3.25% |
State Custodians | 0.25% | 2.90% |
U Bank | 0.25% | 2.84% |
Hunter United | 0.20% | 3.09% |
Reduce Home Loans | 0.20% | 2.69% |
P&N Bank | 0.16% | 3.47% |
AMP | 0.15% | 3.24% |
Bank of Melbourne | 0.15% | 3.09% |
Bank SA | 0.15% | 3.09% |
Bank of Sydney | 0.15% | 2.96% |
Bendigo Bank | 0.15% | 3.14% |
G&C Mutual Bank | 0.15% | 2.79% |
Heritage Bank | 0.15% | 3.07% |
HSBC | 0.15% | 3.02% |
ING | 0.15% | 2.99% |
Loans.com.au | 0.15% | 2.88% |
Macquarie Bank | 0.15% | 3.09% |
ME Bank | 0.15% | 3.19% |
My State Bank | 0.15% | 3.23% |
NAB | 0.15% | 3.20% |
Qudos Bank | 0.15% | 3.13% |
RACQ Bank | 0.15% | 3.24% |
RAMS | 0.15% | 3.86% |
Resimac | 0.15% | 3.06% |
St George | 0.15% | 3.09% |
Suncorp Bank | 0.15% | 3.03% |
The Mutual Bank | 0.15% | 3.73% |
Tic Toc | 0.15% | 2.84% |
Virgin Money | 0.15% | 3.09% |
Well Home Loans | 0.15% | 2.82% |
Westpac | 0.15% | 3.23% |
ANZ | 0.14% | 3.24% |
Australian Military Bank | 0.14% | 3.31% |
Greater Bank | 0.14% | 3.33% |
People's Choice Credit Union | 0.14% | 3.20% |
Bankwest | 0.13% | 3.30% |
Commonwealth Bank | 0.13% | 3.22% |
Credit Union Australia | 0.13% | 3.20% |
IMB Bank | 0.13% | 3.18% |
Newcastle Permanent | 0.13% | 3.19% |
Bank Australia | 0.10% | 3.18% |
Bank of Queensland | 0.10% | 3.49% |
*Accurate as of October 9, 2019.
Disclaimer
This article is over two years old, last updated on October 11, 2019. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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