Interest rate relief arrives today—find out how much you could save

As the cost of living continues to rise, Australians are constantly on the lookout for ways to ease the financial burden. Today, there’s good news for millions of homeowners across the nation. In a move that will bring a collective sigh of relief, major banks are beginning to pass on the Reserve Bank of Australia’s (RBA) recent interest rate cut.

The RBA recently made the decision to lower the official cash rate from 4.35 per cent to 4.10 per cent, a move that has prompted lenders both large and small to pass on the savings to their customers. 

This reduction of 25 basis points will see homeowners save between $40 to $190 per month. 

According to figures from REA Group, the impact of this rate cut is substantial. For the 19 per cent of more than 7,300 Yahoo Finance readers who feared they would have to sell their homes without a rate cut at the RBA’s February meeting, this news is particularly welcome.

However, it’s important to note that not all banks are implementing these changes simultaneously. Here’s a snapshot of the new lowest effective variable rates from some of the major banks delivering mortgage relief today:

Several other banks, including Gateway Bank, Ubank, Bank First, Defence Bank, and Qudos Bank, have already reduced their variable rates.

If your bank isn’t listed here, don’t fret—they’re likely to deliver mortgage rate relief in the coming days. You can find a full list of dates for when banks are dropping rates, ranging from February 25 to March 12.

The relief you’ll experience will depend on your circumstances and the level of mortgage stress you’re currently facing.

Mortgage stress is typically defined as spending more than 30 per cent of your salary on your home loan. Shockingly, a poll discovered that 52 per cent of 7,500 Yahoo Finance readers are spending over 40 per cent of their income on loan repayments.

In Sydney, the situation is even more dire, with houses consuming 57.6 per cent of wages and units taking 46.7 per cent.

However, if you’re not in mortgage stress, you could benefit greatly by maintaining your current repayment amounts. By doing so, you’ll reportedly pay off more of the principal part of your loan, and while your interest rate might drop, you could potentially shave years off your loan term and save tens of thousands in interest over the life of the loan.

Finance expert Ben Nash suggests that for those who have been struggling, the extra money will be a welcome buffer. But for those with a balanced budget, it’s an opportunity to get ahead on their mortgage.

He cites an example of a $711,000 mortgage where a 0.25 per cent rate cut could result in $110 per month in savings. Without changing the repayment amount, this could lead to a two-year reduction in the loan term and a saving of $66,580 in interest over 30 years.

Yahoo Finance contributor Graham Cooke points out that banks delaying on passing the RBA rate cuts can yield millions of dollars in extra interest for the banks: ‘If just 28 basis points is held back on $1.5 trillion of mortgages, that equates to over $10 million in additional revenue every day.’

In light of these changes, it’s a good time to review your mortgage and consider how you can make the most of the rate cuts. Whether it’s by reducing your monthly expenses or by paying off your loan faster, the savings are there for the taking.

For those who are feeling the pinch of mortgage stress, this rate cut could provide some much-needed breathing room. And for the financially savvy, it’s an opportunity to accelerate your journey to becoming mortgage-free.

We’d love to hear from you, our readers. Have you experienced mortgage stress, and how will these rate cuts affect you? Share your stories and strategies with the YourLifeChoices community in the comments below. 

Also read: The unseen cost of interest rate cuts: Retirees and savers to take a hit