RBA leaves the cash rate on hold in December 2020 at 0.10%, but there’s still potentially thousands of dollars to be saved on a home loan

While the next cash rate announcement won’t be until February, its still a great time to do a home loan health check and potentially save money.

“Given the outlook, the Board is not expecting to increase the cash rate for at least three years,” said RBA Governor Philip Lowe.

The board’s focus is on economic recovery, and it hopes its monetary policy will continue to complement fiscal stimulus. So far, it says households and businesses have potentially benefited from increased cash flow and lower borrowing rates.

94% of mortgage holders could be losing out by failing to switch

Since June 2019, the Reserve Bank of Australia (RBA) has made six cash rate cuts which have decreased some home loan interest rates across the board and yet only a fraction of Australian households have taken up the opportunity to refinance their mortgage.

According to the Australian Bureau of Statistics (ABS) and the Australian Prudential Regulation Authority (APRA), the lending indicators data from June 2020 depicted that 321,364 mortgage holders or 6.2% had refinanced their loan in the 12 months to June 2020.

The data shows that most Australians, an approximation of 4.6 million households did not refinance in that period and may potentially be missing out on saving thousands of dollars.

How much could you save?

Although the cash rate remained unchanged in December, there are many lenders who have dropped their interest rates since November.

Below is an example of the potential savings someone could make by switching to a product with a lower interest rate:

Loan SizeExample RateNew RateMonthly SavingsAnnual Savings
$1 mil3.60%2.60%$543$6,516

Further to this, the ACCC’s home loan price inquiry interim report also calculated that borrowers with a loan over five years old were paying an average of 40 basis points above what new customers with new loans were paying.

This finding shows that loyalty can cost existing customers. The big four banks focus on attracting new home loan customers by advertising increasingly large discounts over time has created a difference between the average interest rates paid for new loans compared to existing loans.

The calculation in the report found that for a loan size of $200,000, a customer could have saved $850 in interest repayments in the first year if they had refinanced to obtain a new interest rate. Hence, the report urged borrowers to ask for a better rate.

How do I take advantage of historically low interest rates?

Whether you’re looking to refinance an existing home loan or purchase a property, it’s worth speaking to an experienced mortgage expert.

Homeloanscomparison.com.au’s cost and obligation-free service can help you find a competitive home loan from a panel of 25+ lenders, which you may have otherwise not known about. If we have potential home loan options for you, you’ll be connected to one of our experienced home loan specialists, who can negotiate with the lenders and save you time by assisting with the paperwork.

We also have lender cashback offers available of up to $4,000*, speak to our team to learn more.

Here’s how you get started online:

Step 1. Select your state below.

Step 2. After answering a few questions, you’ll be given possible home loan options to start comparing straight away and see if you can potentially save on your mortgage.

Select your state and enquire now.

*Terms and conditions, fees and charges, and normal lending criteria apply. Read More

^Comparison rate based on a loan of $150,000 over 25 years. WARNING: This comparison rate is true only for the example or examples given and may not include all fees and charges. Different terms, fees and other loan amounts may result in a different comparison rate.

** Terms and conditions apply, cashback offers are provided directly by some lenders and may only be available for particular loan products. Cashback offers are not always available with advertised loan products. Ask us to learn more.