Why a 1% difference in your home loan rate matters

By Tom Watson · · 2 min read
Fact Checked
Advertiser disclosure
woman-with-arms-outstretched

Are you paying the lazy tax? Whether it’s your electricity bill, phone plan or car insurance, it can be so easy to stick with the same provider and plan year after year - especially if you think you’re getting a good deal.

But complacency costs, particularly when it comes to home loans.

In recent years home loan rates have plummeted, yet according to a recent Mozo analysis only 6% of mortgage holders (roughly 320,000 people) had refinanced their home loans in the 12 months to June 2020.

Why is that an issue? If you haven’t refinanced recently, chances are that the rate you're on hasn’t kept pace with the sharpest home loan offers on the market, meaning you could be missing out on some serious savings. Let’s break it down.

How far have rates dropped?

Since June 2019, the Reserve Bank has cut interest rates five times, resulting in a drop in the official cash rate from 1.50% to 0.25%. And as the graph above shows, lenders have largely followed suit.

According to our latest home loan statistics, the average variable rate for owner-occupiers in the Mozo database has dropped by over 1.00% in just two years. And the average 3-year fixed rate for owner-occupiers has fallen by an even greater amount.

Of course, those are just average rates. There are much lower rates on offer, as a handful of variable rates have dropped below the 2.50% mark in recent months while plenty of fixed rates have dipped under 2.20%.

How much could you save with a 1% cut?

Now that you’re up to speed with how far home loan interest rates have fallen, you’re probably wondering what sort of difference a substantial cut could make to your own loan repayments?

Depending on your current rate, and the size of your loan, it could be a big one - we’re talking about monthly savings in the hundreds of dollars.

Here’s an example. To keep things simple, the table below shows the difference in monthly repayments on a number of loan balances between a rate of 2.50% and 3.50% (which is just above the current variable rate average).


2.50%3.50%Difference
$200,000$1,060/month$1,160/month$100
$300,000$1,590/month$1,740/month$150
$400,000$2,120/month$2,320/month$200
$500,000$2,650/month$2,900/month$250
$600,000$3,179/month$3,480/month$301

These figures assume that a borrower is making principal and interest repayments over a loan term of 20 years, and the savings don’t take into account any potential discharge or sign up fees.

This is just part of the story though, because refinancing to a lower rate could save you tens of thousands of dollars in interest over the life of the loan. See the difference for yourself by plugging your current rate into our switch and save calculator.

RELATED: 5 reasons to refinance your home loan now

So, are you ready to see if you can put money back in your wallet by refinancing to a home loan with a sharper rate?

Get started by checking out some of the most competitive deals around for refinancers in the table below, or head on over to the Mozo refinance home loan hub to compare the latest rates and offers from an even wider variety of lenders.

Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can compare more home loans here.
Last updated 24 November 2024 Important disclosures and comparison rate warning*

Refinance home loan comparisons on Mozo

Promoted

  • 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 Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <95%
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.28 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.

  • 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.

  • 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.

  • Budget Home Loan

    • LVR <80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.07 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Enjoy a discounted variable home loan from IMB. Get up to $4,000 cashback (T&Cs apply). Life-of-loan discount off IMB’s standard variable interest rate. Unrestricted additional repayments. Free Internet and Mobile Banking redraws (T&Cs apply). No monthly fees to pay. Up to a 30 year loan term. Split loan available. No offset account.

  • 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.

Showing 6 of 430 home loans. Use the filters to see more
image of houses

Need help with your Home Loan?

Whether you're looking to purchase a new home or refinance your existing loan, our friends at Lendi can help! Lendi’s expert advice is completely free of charge. Book an appointment and enter the draw to win $30K.

Learn more

* 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.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

Compare home loans