Do home loan rate drops only benefit new customers?

By Olivia Gee · · 4 min read
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Two people looking at an empty apartment, considering buying property.

Whether you’re considering your first home loan or well into paying off a current mortgage, recent interest rate reductions could impact you. But it does depend on the type of home loan you’ve taken out and with which lender.

Before we get into it, the first thing you’ll need to understand is why the Reserve Bank of Australia (RBA) cash rate – which fell to yet another historic low last week – is important. 

A low cash rate means banks benefit from cheaper lending, and they can choose to pass on those savings to their own borrowers. This, in theory, should encourage spending elsewhere and help stimulate a sluggish economy.

However, this is merely a benchmark for banks to consider when setting their own rates and they’re in no way required to follow the RBA’s lead. Banks can pick and choose where they make cuts across lending and deposit rates to attract or retain the kind of banking customers they’re after.

So, when it comes to home loans, let’s take a look at who might benefit from the flow-on effects of the November RBA rate cut. 

As a new customer, how can I benefit from interest rate drops? 

If you’re about to jump on the homeownership bandwagon, a low interest rate market is a great place to start. Lenders are keen to nab attractive new customers who will have a big chunk of mortgage to pay off (thus offering lenders higher potential earnings via interest payments).

To entice these home loan customers, many banks and non-bank lenders have been offering increasingly low rates, some of which have been cut again by the full RBA reduction. This is predominantly across fixed home loan rates, but some variable rates have also seen cuts. 

As a new customer you’ll have the pick of the reduced rate litter. Your home loan deposit size and other lending criteria may impact what rate you can access, but you’ll be in a great position to negotiate a better deal with multiple competitive offers out there.

The next choice is whether you go with a fixed or variable rate. While there have been more cuts to fixed rates recently you shouldn’t necessarily sideline variable options. 

Since the RBA is anticipating rates will remain low for some time as the economy recovers from COVID-19, we may see sustained low rates or further cuts to variable rates. While they’re still changeable, this could mean more savings while retaining flexibility.

What if I already have a home loan?

This is where things get a little more complicated. The effect of rate cuts on existing home loan customers will depend on the type of loan they have or are looking to switch to.

For variable home loans: This is where current home loan holders could be saving. If you have a variable home loan and your lender makes a cut, it can be for new and existing customers. Check with your provider to make sure you’re getting the cut if you’re eligible.

For fixed home loans: You probably won’t notice any changes to your rate. Even if your lender drops its fixed rates across various terms, that won’t necessarily impact your rate since you locked it in when you originally took out the loan.

However, if you’re coming to the end of your fixed timeline, keep the lower advertised rate in your back pocket for negotiating your next fixed or variable rate.

For refinance home loans: If you’re in a position to refinance your home loan (say, you’ve paid a substantial portion of the loan and have a steady income), you might be able to nab a bargain as rates drop.

Lenders want to attract borrowers who are low-risk and likely to pay back the loan. This is often someone with more equity in their home – it’s referred to as having a low loan-to-value-ratio (LVR). So, if you fit in this category and are considering refinancing, you may be able to score the most recently reduced headline rates.

What home loan reductions have we seen after the November RBA cut?

Rate reductions have been top of mind since the cash rate was cut by 15 basis points down to 0.10% on 3 November.

We’ve seen the big four cut fixed rates (no movement in the variable department) alongside a host of smaller institutions and online lenders making changes to fixed loans as well as a few variable shifts.

If you take a look at Mozo’s home loan statistics page you’ll see this trend rolling on from when COVID-19 first hit in March, with fixed rates being cut more dramatically than variable home loans.

The average variable rates Mozo tracks for owner occupiers paying back principal and interest on a loan have dropped from 3.68% in March to 3.34% at the start of November.

Meanwhile, the one-year fixed option for this kind of loan has dropped by almost double the basis points in that time, from an average of 3.27% to 2.51%. Longer term fixed rates haven’t plunged quite as quickly but are still out-pacing variable reductions on average. 

So, if you’re considering taking out a home loan or negotiating with your lender, keep these kinds of emerging trends in mind. Then, compare the deal you’re getting with some of the options below.

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Last updated 30 October 2024 Important disclosures and comparison rate warning*

Home loan comparisons on Mozo

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  • Fixed Home Loan

    • Owner Occupier
    • Principal and Interest
    Interest rate
    5.54 % p.a.
    Fixed 2 years
    Comparison rate
    5.93 % p.a.
    Initial monthly repayment
    $2,852
    Go to site

    Competitive fixed rate on up to a 30 year loan term. No application fees to pay. Additional repayments up to $20,000 per year without penalty. Free online redraw. Optional 100% offset feature ($10/month) 10% minimum deposit. Fees & charges apply, Australian Credit Licence 237879 is held by Bendigo and Adelaide Bank Limited, the credit provider.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Fixed Express Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.54 % p.a.
    Fixed 2 years
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $2,852
    Go to site

    Lock in a low 2 year fixed rate with the Mozo award winning Home Lender of the Year. Available for live-in borrowers with just a 10% deposit required. Free extra repayments (up to 20% in fixed period), free redraw and partial offset available. $10 monthly service fee. Aussie support centre. Fast approvals. Up to 6 free offset accounts (T&Cs apply).

  • Fixed Home Loan

    • Owner Occupier
    • Principal and Interest
    Interest rate
    5.54 % p.a.
    Fixed 2 years
    Comparison rate
    5.93 % p.a.
    Initial monthly repayment
    $2,852
    Go to site

    Competitive fixed rate on up to a 30 year loan term. No application fees to pay. Additional repayments up to $20,000 per year without penalty. Free online redraw. Optional 100% offset feature ($10/month) 10% minimum deposit. Fees & charges apply, Australian Credit Licence 237879 is held by Bendigo and Adelaide Bank Limited, the credit provider.

  • Fixed Express Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.54 % p.a.
    Fixed 2 years
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $2,852
    Go to site

    Lock in a low 2 year fixed rate with the Mozo award winning Home Lender of the Year. Available for live-in borrowers with just a 10% deposit required. Free extra repayments (up to 20% in fixed period), free redraw and partial offset available. $10 monthly service fee. Aussie support centre. Fast approvals. Up to 6 free offset accounts (T&Cs apply).

  • Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.59 % p.a.
    Fixed 5 years
    Comparison rate
    6.27 % p.a.
    Initial monthly repayment
    $2,867

    Get repayment certainty with HSBC’s low 2 Year Fixed Rate Home Loan. Make up to $10,000 of extra repayments a year. The option to split your home loan between fixed and variable. Plus, score $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 28 February 2023 and settle by 30 April 2023.

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    5.74 % p.a.
    Fixed 3 years
    Comparison rate
    6.81 % p.a.
    Initial monthly repayment
    $2,915

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

  • Variable Home Loan

    • Owner Occupier
    • Principal and Interest
    Interest rate
    5.98 % p.a.
    Variable
    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,991
    Go to site

    Competitive variable rate on up to a 30 year loan term. No application fees to pay. Unlimited additional repayments. Free online redraw. Optional 100% offset feature ($10/month) 10% minimum deposit. Fees & charges apply, Australian Credit Licence 237879 is held by Bendigo and Adelaide Bank Limited, the credit provider.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discounted Home Value Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.99 % p.a.
    Initial monthly repayment
    $2,995

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Receive $3,288 cashback when you refinance an existing home loan. Minimum loan amount of $250,000, settle within 120 days from applying.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.22 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Elevate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.18 % p.a.
    Variable
    Comparison rate
    6.18 % p.a.
    Initial monthly repayment
    $3,056

    Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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