For the first time since November 2020, the Reserve Bank of Australia (RBA) has cut interest rates, dropping the cash rate by 0.25 percentage points to 4.1%.
After a tough few years of relentless rate hikes, this news comes as a breath of fresh air for mortgage holders.
But what does this really mean for your home loan, and how can you take full advantage of these changes? Let’s break it down.
When will the savings start?
Within minutes of the RBA’s announcement, the major banks—Commonwealth Bank, Westpac, ANZ, and NAB—confirmed they would be passing on the full 0.25% cut to variable home loan customers.
Most lenders will adjust rates by the end of February, except for Westpac, which will implement the lower rates on March 4th.
If you’re a mortgage holder with a variable rate, this means lower repayments. For example, Canstar estimates that for a $600,000 loan, this rate cut could save borrowers around $92 per month. If you owe $1 million, you could see a saving of around $154 per month.
But before you celebrate and continue making the minimum repayment, let’s talk about how to make this rate cut work harder for you.
Is refinancing the smart move?
While the rate cut is great news, it’s important to remember that banks are still businesses. Even with lower rates, many lenders are still charging more than necessary.
This is where refinancing can be a game-changer. If you’ve had your home loan for a few years, chances are your interest rate isn’t as competitive as what’s currently on offer.
Refinancing allows you to:
- Secure a lower interest rate (potentially saving thousands over the life of your loan).
- Reduce your monthly repayments.
- Access loan features like offset accounts and redraw facilities to better manage your finances.
- Potentially consolidate other debts into your mortgage at a lower interest rate.
Is now the right time for refinancing?
Absolutely! With lenders competing for business, now is the perfect time to shop around and secure a better deal.
The process of refinancing is easier than many people think, and our team can guide you through every step to ensure you maximise your savings.
Whether you want to reduce your repayments, pay off your mortgage faster, or free up cash for other investments, refinancing could be the financial boost you’ve been waiting for.
What’s the refinancing process?
Refinancing your home loan might sound complicated, but it’s actually a straightforward process when you break it down. Here’s what’s involved:
- Assess your current loan – Start by reviewing your existing mortgage. Look at your interest rate, fees, and any features you currently have (such as an offset account or redraw facility).
- Determine your goals – Are you looking for a lower interest rate, better loan features, or to free up equity? Knowing what you want will help you choose the right refinancing option.
- Compare lenders and loan products – This is where a mortgage broker can be invaluable. They’ll compare multiple lenders to find the best rates and terms that suit your needs.
- Check eligibility and costs – Some lenders have specific requirements for refinancing, such as minimum income levels or property valuations. You’ll also need to consider any exit fees from your current lender and potential new loan establishment costs.
- Submit your application – Once you’ve chosen a new loan, you’ll need to provide documents like proof of income, assets, liabilities, and details of your current loan. The new lender will assess your application and conduct a property valuation.
- Approval and settlement – If approved, your new lender will pay off your existing mortgage, and your new loan will take effect. From there, you’ll start making repayments based on the new terms.
Let’s find your best deal
Don’t let this rate cut pass you by without taking action. We’re here to help you assess your current home loan, compare options, and secure the best possible deal.
Contact us today to discuss your refinancing options and start saving!
* This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
