If you’re a homeowner with a mortgage, you’ve probably been watching the Reserve Bank of Australia’s (RBA) recent rate cut with a hopeful eye, thinking, ‘Finally, a bit of relief for the hip pocket!’
But before you start planning how to spend those extra dollars, there’s a catch that could leave you paying more than you need to—unless you take action.
For millions of Australians, the much-anticipated savings from the RBA’s rate cut won’t automatically be deposited into their bank accounts.
Unless you specifically ask your lender to reduce your repayments, you could be missing out entirely. It’s a classic case of ‘don’t ask, don’t get’, which often catches many borrowers off guard.
You’d be forgiven for assuming that your monthly mortgage repayments would automatically drop when the RBA cuts rates and your bank passes on the reduction.
But this isn’t the case for most borrowers with the big banks—ANZ, NAB, and Commonwealth Bank. These banks don’t automatically adjust your direct debit repayments after a rate cut.
Instead, your repayments stay the same unless you manually request a change online, through the app, or by calling your lender.
On the other hand, Westpac and Macquarie are the exceptions to the rule. These banks automatically reduce repayments for most customers paying the minimum amount via direct debit, meaning you’ll see the savings without lifting a finger.
How many people are affected?
According to the Australian Bureau of Statistics, more than half or 52 per cent, of all owner-occupier home loans are with CommBank, NAB, or ANZ.
Millions of households could be missing out on immediate relief from lower repayments—unless they know to ask for it.
Even though all the big four banks have passed on the RBA’s 0.25 per cent rate cut to variable home loan rates, only Westpac automatically lowers repayments for customers paying the minimum. For everyone else, it’s up to you to make the first move.
Banks argue that keeping repayments the same after a rate cut is good for customers. You can get ahead on your mortgage and save on interest in the long run by paying more than the minimum. And for some, that’s a smart strategy—if you can afford it.
But as Mozo’s personal finance expert Rachel Wastell pointed out, not everyone has the luxury of extra cash. With the cost of living rising—groceries, fuel, energy bills—it’s money that many Australians need right now.
‘Yes, paying extra will reduce your loan faster, but that only works if you can afford it,’ Wastell said.
‘For many Australians, that money is needed right now for groceries, fuel or rising energy bills, and they’re missing out because they simply don’t know they need to ask.’
Delays and red tape: Don’t expect instant relief
Even if you request a reduction, don’t expect the change to happen overnight. Some banks require up to 37 days’ notice before your new repayment amount starts. Hundreds of dollars in extra repayments could have gone towards other bills or expenses.
Banks like CommBank and NAB say that most customers choose to keep their repayments the same to pay off their loans faster.
But Mozo, a leading financial comparison site in Australia, questions whether borrowers make an informed choice or don’t realise they have one.
‘Banks say customers are choosing not to lower repayments, but we’re asking if they even know they need to?’ said Wastell.
‘It’s hard to call it a choice if borrowers don’t realise there’s a choice to make.’
What should you do?
If you’re not sure whether you’re getting the benefit of the rate cut, here’s what you should do:
- Log in to your home loan account (online or via your bank’s app).
- Check your current repayment amount and compare it to what it should be at the new, lower rate.
- Contact your lender if your repayments haven’t changed and you want to reduce them.
- Be prepared for a delay—ask your bank how long it will take for the new repayment to take effect.
If your bank is making it difficult to access the savings from a rate cut, it might be time to shop around. Many comparison tools (like Mozo) can help you find a better deal.
Have you checked your repayments since the latest rate cut? Did your bank make it easy, or did you have to jump through hoops? Share your experiences in the comments below.
Also read: Millions of Australians left guessing as banks hide savings rate changes
