What would an RBA rate cut mean for your mortgage?

It’s been on the cards for a while, but a cut to the RBA’s official cash rate cut could finally be just around the corner. This could mean relief for borrowers, but according to Mozo Data Manager Peter Marshall, it’s not that simple.

The RBA’s official cash rate has sat at an all-time low 1.50% for a record long 26 months. But with the first cash rate announcement of the year coming tomorrow, Marshall said it’s only a matter of time until we see the RBA lowering the official cash rate.

“Housing was once the main reason why the RBA couldn’t cut rates further. But since house prices have been falling so hard and fast, a lower cash rate is no longer an issue,” he said.

“Even if it does give house prices a little bump up the Reserve Bank have the scope on both the inflation front and housing to cut rates and not have a negative impact on the economy. “

Another reason the RBA may be inclined to cut rates is to slow the flood of out of cycle home loan rate rises made by lenders. Although banks are generally expected to have rates in line with RBA cash rates, recent funding cost pressures have seen a trend of rising rates hitting old and new borrowers.

What could an RBA rate cut mean for your mortgage?

Marshall has predicted that there could be two RBA rate rises this year and that the first rate would stop mortgages getting more expensive by ending the need for more bank hikes. But it wouldn’t be until a second cut that banks would begin to pass those savings onto borrowers through home loan rate cuts.

“Last year, a lot of lenders, about half in Mozo’s database increased rates by between 6 and 20 basis points. And when the RBA cuts, it’s usually by 25 basis points. So that actually leaves only a 5 basis point cut difference from where a lot of borrowers were 8 months ago,” he said.

“I think that one cut is just going to put people back roughly where they were. So there will need to be two cuts if the RBA actually want to give borrowers some relief and boost spending.”

The effect on your mortgage if your lender passes on the savings from a rate cut

Although there’s no guarantee lenders will pass on the savings from an RBA rate cut, if they do it could mean some extra room in Aussie budgets. To give you an idea of what an interest rate cut could really mean, we’ve calculated the difference in monthly repayments on a $400,000 loan, with different sized rate cuts.

CutNew RateNew RepaymentMonthly savingsSavings in one year
0.05%4.31%$1,982$12$144
0.10%4.26%$1,970$24$288
0.15%4.21%$1,958$36$432
0.20%4.16%$1,947$47$564
0.25%4.11%$1,935$59$708

*Based on a $400,000 home loan over 30 years at 4.36% average variable interest rate and LVR of 80%.

Want to do your own calculations on what an RBA rate cut could mean for you? Head over to our home loans repayment calculators

If your lender isn’t passing on rate cuts, or you think you could get a better deal, head over to our home loans table to compare low rate home loans today.

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

Home loan comparisons on Mozo

  • Fixed Home Loan

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    5.93 % p.a.
    Initial monthly repayment
    $2,852
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    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

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    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

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    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
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    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
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    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

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    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
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    Interest rate
    5.98 % p.a.
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    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,991
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    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

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    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

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    $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

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  • Mortgage Simplifier

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  • Elevate

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    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.

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.