Why a 1% difference in your home loan rate matters


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).


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.

Compare refinance home loans - last updated 9 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    3.60% p.a.variable for 24 months and then 4.00% p.a. variable
    3.96% p.a.

    Already includes July RBA rate increase. New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. 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 in as little as 10 minutes.

  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.


* 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, loan amount and term entered. 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

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