February 18th, 2025, marked something significant: the first rate cut in 4 years. That’s right. Four. Years. The last rate cut before that happened in November 2020.
Questions must be flying in your head right now. “What does this mean? How can I be strategic during this time?” Don’t worry – we’ve got you covered. In this article, we’re diving into how to make the most of the rate cut.
Now, keep in mind, this is an opportunity that might not last all that long. We don’t know if the easing will continue. But we live in the moment, and try our best with the information at hand.
Here are 8 ways you can use the recent RBA rate cut to your advantage:
1. Check if you are getting the full rate cut from your lender
Is your lender offering the best terms possible by passing on the FULL rate cut?
According to a recent article, Finder suggests that up to 2/3 Australian lenders have not yet announced plans to reduce their rates. For more information, view here.
Some lenders, however, have announced they are indeed passing on the 25-basis-point reduction (like the big four banks). You don’t want to miss out on these savings.
Or, even further savings. Yes, you read that right.
Some lenders might reduce rates even further than the full rate cut with the right negotiation, and if your repayment history is strong.
For further information and advice, feel free to contact us here.
2. Refinancing
According to a recent article from SBS News, we are likely going into a “refinancing frenzy”, where nearly HALF of Australians mortgage holders are thinking of refinancing. That’s huge.
During this time, you could consider switching to:
- A fixed-rate loan if you’re concerned a rate hike might happen
- A variable-rate loan if you expect rates to continue cooling
- A split rate loan to get the best of both worlds and have some stability, but further relief if rates continue falling
More refinancing options include:
- Looking into cashback incentives
- Comparing lenders and what they offer
For the best recommendations tailored to your needs, book a free consultation with us. We are happy to help!
3. Review loan features.
Ensuring your loan is optimised for your needs is a MUST during this long-awaited rate cut.
Does your lender offer flexible repayment options? Offset or multiple offset accounts? Split loans?
Don’t waste your time thinking about whether your current loan features suit you. Instead, you are welcome to contact us to review this for you and explore options.
4. Consider using an offset account to reduce your interest further.
Offset accounts are just as they sound. You pay interest only on the loan value minus the offset account value.
Let’s take an example. Say you have a loan of $800,000, and in your offset account, you have $25,000. In this case, you will pay interest only on $775,000.
You can also usually access your offset account without restrictions. Use it just like a regular savings account, and for different financial needs like daily expenses. Some lenders even offer multiple offset accounts.
5. Consolidate debts
Do you have debt in the forms of credit card debt, car loans, buy-now-pay-later services, or other?
Depending on your situation and circumstances, you might want to consider consolidating these into your home loan. In other words: take some of your other debts, then combine them with your mortgage into one loan with the same, single interest rate (the home interest rate), rather than the higher other personal loan rates.
This is advantageous if your home loan interest rate is lower than the interest rates of your other debts. In this case, consolidating your debts can reduce your overall interest and save money. Plus, you can reduce several loan repayments into one single payment.
Like with other strategies, this does come with risks, but can be really beneficial for the right situation. Interested in learning more? Do not hesitate to reach out.
6. Cashback offers
In some cases, you might be eligible for cashback offers from lenders. These are usually limited-time deals. In response to the recent rate cuts, lenders might become more competitive for customers, and hence more likely to offer these kinds of deals. Some lenders in February 2025 are offering thousands in cashback.
7. Consider a loan with a redraw facility
Some lenders offer something known as a redraw facility. Redraw facilities involve the borrower making extra loan repayments (more than the minimum). These extra repayments can then be accessed if you need the money.
During periods of low interest, a bigger portion of your repayments goes towards paying off your home. So, more frequent repayments during this time can pay off your house faster than in high-interest conditions.
While beneficial, there are also some limitations on redraw facilities. For example, fees, how many redraws you can make within a period of time, as well as minimum/maximum amounts that can be drawn at once.
8. Last but not least, speak with a mortgage broker
This is really one of the most effective ways to make the most of the rate cuts.
Our mortgage brokerage can guide you through what is best for your situation, the risks to consider, and potentially bring up possibilities you might not have even considered.
Reach out to us here for more information.
We hope you enjoyed and learned something from us today. Thanks for tuning in!
This article is for education and entertainment purposes only, and does not constitute official professional advice. For specific solutions to suit your needs, consider contacting us here.
We look forward to seeing you again,
Next Step Mortgage Broking
