Fact Checked
June Home Loan Market Update
Interest rates are falling down, falling down, falling down. Interest rates are falling down, my fair lady.
Most mortgagors are receiving their much-desired rate cuts this month, with the majority of lenders passing on last month's RBA cash rate cut to variable-rate customers in early June.
For the typical dinky-di Aussie household with a $660,000 30-year home loan at 6.00% p.a, such a rate cut would shave around $105 off their minimum monthly repayments (try out our rate change calculator for yourself). Over a year, that's a $1,260 saving, which is not bad at all.
If you combine that with February's 0.25% rate cut, that household would be saving $210 per month, or more than $2,500 per year.
That's a fair bit of extra dough to splash around, and with economists tipping there'll be more rate relief to come in the latter half of the year, many households will be dreaming big.
Meanwhile, the latest refinancing numbers suggest some households have been taking matters into their own hands, perhaps tired of waiting for the RBA rate cuts to come.
In the March quarter of this year, more than 104,000 home loans were refinanced - up about 25% on the same quarter of last year.
And with recent out-of-cycle cuts to fixed and variable rates for new customers from major players such as CommBank, ANZ and Westpac, lenders are tempting more borrowers into switching.
But if you are trying to give yourself a rate cut, just keep in mind there are plenty of options beyond the big four.
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Home Loan Interest Rates in Australia
Like many other developed countries, interest rates in Australia are much higher now than they were during the pandemic, when many lenders were offering home loans for under 2.00% p.a.
Interest rates on home loans have generally followed the trajectory of the cash rate, which is set by the Reserve Bank of Australia (RBA). As the cash rate is increased, rates on loan products typically also increase, and the same relationship applies when the RBA cut rates. From April 2022 to November 2023, the cash rate went from 0.10% to 4.35%, which is the main reason why home loan rates went up so much. Forecasts on the future direction of the cash rate are mixed, with the RBA decisions largely dependent on economic factors such as inflation and unemployment.
Rate increases are not good news for borrowers, but good news for debt-free savers - vice versa for rate decreases.
Lenders tend not to waste any time in passing on the RBA's cash rate rises to mortgage rates, but some are offering much lower rates than others so there are still savings to be had.
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