Finally, it’s time to review your interest rate. Here’s how.

The 0.25% cash rate cut ushered in by the Reserve Bank of Australia (RBA) and passed on by a number of lenders signals the perfect time to review your interest rate. The cash rate is now hovering at 4.10%.

The first cut since late 2020 has been passed on big the big four banks and a number of other lenders. However, just because the RBA has made the cut, that doesn’t mean your lender will pass it on, so keep a close eye on rate movements and see if your lender has passed the cut on.

REA Group senior economist Eleanor Creagh says that as interest rates move lower this year, affordability and buyer confidence will improve, which will drive renewed demand and also some price growth.

“However, the stretched starting point for housing affordability will likely dampen the uplift in prices compared to prior easing cycles, resulting in the pace of home price growth trailing the strong performance of recent years,” Ms Creagh adds.

Available savings

For an average mortgaged homeowner on a variable rate with a $600,000 loan, the cut will mean a reduction in minimum monthly repayments of $92 a month. Interest on repayments is calculated daily, meaning until the day the rate cut is passed on by your lender, interest charges will remain the same.

But if your bank doesn’t pass on the cut, you won’t be saving anything, so it pays to check if your lender has passed the rate cut on.

To explain, individual lenders decide how much of the RBA rate cut to pass on. At the same time, lenders may vary their fees and charges, so it’s worth checking in to ensure if the rate cut means that you’re actually making a saving.

'How interest rate cuts affect the property market': youtube.com/mortgagechoice

Mortgagees will be looking at a slight relief with the initial cut, realising that 0.25% is not enough to offer a large reduction in their repayments. But it is enough to offer a level of confidence that the rate reductions will be ongoing with a couple more cuts to come, Gold Coast-based Mortgage Choice broker Deslie Taylor says.

“This is a sign of improvements resulting in cuts that will then see a financial impact for the better. Most clients I have spoken to intend to continue to maintain the payments they’re making now to ensure they are able to reduce the overall loan with additional repayments to begin to claw back some of the lost time with the slightly higher rates they have experienced,” Ms Taylor says.  

Lifestyle changes

If you haven’t reviewed your loan for a year or two or your life situation has changed, you might find that your loan features don’t work as well for you anymore.

Also, if your bank isn’t willing to pass the rate on, you may want to consider refinancing with a different lender.

For example, if you’ve managed to pay off a chunk of your principal, you may find better value from a redraw facility, an offset account or a line of credit to help facilitate some renovations.

Mortgage Choice chief executive Anthony Waldron says brokers are reporting an uplift in mortgaged homeowners interested in refinancing. In a sign that borrowers are expecting rates to fall further, 96 per cent of loans submitted to brokers in January 2025 were for variable rate home loan products, he says.

“With this rate cut, I think we can expect competition to heat up in the home loan market and I encourage borrowers to seize this opportunity to secure a better rate. If you haven’t had your loan reviewed in the past year, chat with your broker to ensure your loan still meets your needs,” Mr Waldron says.

Reviewing your rates

To review your rates, call the bank and ask for a review, or you can do it yourself by comparing interest rates and loan features offered by other lenders online.

Mortgage Choice broker Deslie Taylor says an 0.25% cut is not enough to offer a large reduction in repayments. Picture: supplied

Make sure to contact your existing lender to obtain a rate review on the product you currently have. “It’s wise to call your lender or broker every six to 12 months to obtain better rates. It’s never not worth the call – the worst the lender can say is no,” says Ms Taylor.

“Remember to review the product you have to see if you have a higher rate, what your annual fees are and consider if you’re using that offset account,” she says.

Taylor says that depending on your circumstances, switching to a basic mortgage product may suit you better. “It’s always important to obtain a home loan health check to confirm if it’s cheaper to negotiate your product. Don’t set the loan and forget, always keep on top of the interest rates and ongoing fees,” Taylor says.

The Mortgage Choice calculator will help you work out how long it will take to pay off your home loan to be mortgage free, so plug in your current loan size, term and interest rate to one a couple of these sites to see the difference.