Where’s your rate cut? Why mortgage repayments haven’t changed for millions of borrowers

Key points

• ANZ, CommBank and NAB do not automatically lower direct debit repayments for your mortgage when variable rates come down.

• Millions of home loan customers may be wondering why their mortgage repayments haven’t been cut back, as more than half (52%) of owner occupier home loans are with ANZ, CommBank and NAB.

• Borrowers who want their direct debit to be reduced must manually request a change or adjust their repayment online or in-app.

Many banks are already passing on home loan rate cuts following the Reserve Bank’s interest rate decision, but millions of Aussie mortgage holders may be wondering why their monthly mortgage repayment still hasn’t changed.

Mozo has found that it could be because your lender doesn’t automatically lower the direct debit for your mortgage repayment when rate cuts come in.

The Big Four banks were quick to announce they would be reducing interest rates on their variable home loans by 0.25% in line with the Reserve Bank’s interest rate decision, but most of them require their customers to actually request for their repayments to come down.

ANZ, CommBank and NAB are among those which don’t automatically reduce your monthly repayment – you’ll need to put in a request online, in-app or over the phone.

Other big lenders such as Westpac and Macquarie do automatically lower monthly repayments without customers needing to opt in.

“Most borrowers assume they will pay less when rates are cut,” says Mozo’s finance expert, Rachel Wastell.

“But unless you take action, your lender could leave your direct debit amount exactly where it is, even if your rate has fallen.”

It’s important to note that keeping your monthly repayment at a higher amount, or paying more than you need to can be a good thing, as it can help you pay off your home loan faster because more of your money is going towards paying back the amount you borrowed.

Wastell says leaving repayments higher can be a good strategy to get ahead on the mortgage, but for those struggling with cost-of-living pressures, the missing cash could have an impact.

“Yes, paying extra will reduce your loan faster, but that only works if you can afford it. For many Australians, that money is needed right now for groceries, fuel or rising energy bills, and they’re missing out because they simply don’t know they need to ask.”

CommBank says that after the Reserve Bank of Australia (RBA) lowered the cash rate in February, about 14% of its eligible customers decided to reduce the monthly direct debit for their mortgage.

Similarly, NAB reported that more than 95% of its customers kept their repayments at the same level following the February cut to pay down their home loan quicker.

But Wastell questions whether millions of mortgage holders are aware they have a choice in the matter.

“Banks say customers are choosing not to lower repayments, but we’re asking if they even know they need to?” says Wastell. “It’s hard to call it a choice if borrowers don’t realise there’s a choice to make.”

“Don’t assume your bank will do it for you. If your lender is making it hard to access the savings from a rate cut, it might be time to compare your options.”

If you’re ready to see if you can get a better deal, start by comparing some of the best home loans available now.