Households across Australia are being urged to review their mortgage repayments following recent rate cuts by the Reserve Bank of Australia (RBA). Notably, Westpac is the only major bank that has proactively lowered direct debit amounts in line with these cuts, leading to significant savings for borrowers. For the typical owner-occupier mortgage of $660,000, this equates to a monthly saving of approximately $213, resulting in over $2,500 in annual savings.
However, financial experts warn that many borrowers could miss out on these benefits unless they take the initiative to modify their minimum repayment amounts. Generally, when interest rates rise, minimum repayment amounts automatically increase; conversely, if rates decrease, borrowers with banks like NAB, ANZ, and Commonwealth Bank must manually adjust their repayments to reflect the new rates. In contrast, customers of Westpac and Macquarie Bank benefit from automatic reductions.
Rachel Wastell, a personal finance expert from Mozo, emphasizes that many homeowners are relying on the RBA’s rate cuts to alleviate financial pressure. However, without proactive changes to their repayments, they may not realise this relief. She warns that the banks will not adjust direct debit amounts unless explicitly requested, leaving many borrowers unaware of the necessary actions to benefit from lower rates.
The potential delay in the adjustment of repayments can also lead to added expenses, as borrowers may unwittingly overpay in the interim. For many, especially considering rising costs of living, these savings could make a significant difference. Recent statistics reveal that after February’s rate cut, approximately 86% of Commonwealth Bank customers and 95% of NAB borrowers did not change their mortgage repayments.
While bank executives assert that the data indicates customers are choosing to maintain higher repayments to accelerate their mortgage payoff, Wastell questions whether borrowers are genuinely aware of this option. She highlights the need for clarity around these processes, arguing that it is misleading to consider it a choice if borrowers are not fully informed about their options.
Homeowners are encouraged to verify their loan repayments through online banking platforms, mobile apps, or by contacting their banks directly to ensure they are taking advantage of lower interest rates. It is crucial not to assume that banks will automatically make these changes, as proactive management of one’s mortgage can provide essential relief amid rising living costs.