Kochie: How to ‘supersize’ your May rate cut
Finance guru David Koch reveals three simple tricks to turn a small rate cut saving into $60k-plus.
What would you do with an extra $1200? Plan a weekend getaway? Pay off some debt or some big bills?
That’s roughly what an average borrower with a loan of $666,000* will have back in their pocket over the course of a year if the Reserve Bank decides to drop the cash rate by 0.25 per cent on the 20th — and banks decide to pass this on to borrowers.
It’s double that if they issue a so-called ‘super-sized’ 0.50 per cent rate cut that’s been floated as a possibility by some senior economists.
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It’s much needed relief for homeowners buckling under the pressure of expensive loans and high interest rates.
I asked the experts at Compare the Market to crunch some numbers.
The average borrower* on an interest rate of 6 per cent is paying roughly $1,500 more a month (that’s about $18,000 more a year) compared to what they would have been paying when some of the most attractive rates in the market were around two per cent during the pandemic.
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And remember that’s $18,000 after tax dollars. No wonder borrowers are feeling the cost of living crisis. While it’s unlikely interest rates will ever be that low again, they really shouldn’t be as high as they are now.
Australian homeowners have borne the brunt of the war against inflation. It’s high time we had some relief.
When those well-deserved rate cuts do start to come through, here are my top tips to stretch every dollar a bit further.
1. Make every dollar count
Homeowners may be able to turn their cash rate cut into a five-digit saving over the life of their loan by directing the savings into an offset account.
Compare the Market did the numbers and someone with a $600,000, 30-year loan could save$58,077 over the life of their loan by diverting their $97 in savings from a 0.25 per cent rate cut into an offset account each month.
Offset accounts offer a great incentive to save. And unlike regular savings accounts, you won’t pay tax on the interest you offset.
You’ll also have flexibility to withdraw money from the offset account should you ever need to. Just make sure you’re happy to pay any additional fees your bank might charge for these features.
2. Work that equity
If you’ve owned your home for more than five years, chances are, it’s gone up in value. National property values were up 39 per cent in March 2025, compared to five years ago, and 68 per cent over the decade, according to CoreLogic’s Hedonic Home Value Index.
Homeowners in Adelaide and Brisbane have experienced the biggest increase, up 94 per cent and around 91 per cent, respectively, in that 10-year period.
What that potentially means, is that a lot of people that are lucky enough to own a home, could have a fair bit of equity, assuming they haven’t taken on more debt.
As an added bonus, they could be saving on their home loan with a cheaper rate. Borrowers with a lower loan to value ratio (LVR) are typically seen as a lower risk, which
banks love. Often there are great discounts for people with LVRs of 60 per cent to 70 per cent.
It’s worth doing a quick comparison to see if you could be on a better rate.
3. Say you’ll walk
Your bank may have passed on a rate cut but that doesn’t necessarily mean you’re getting a good deal.
If you haven’t refinanced for a few years, now could be a great time to shop around and look for a better rate. Mortgage brokers can help do some of the heavy lifting for you, calling lenders to negotiate discounts on your behalf.
Remember, if you have a good track record for making repayments on time, and have a
healthy loan to value ratio, banks want your business!
If your lender can’t beat the new rates on the market, it may be time to walk.
*Average loan size of $666,000 published by the Australian Bureau of Statistics in December 2024
Originally published as Kochie: How to ‘supersize’ your May rate cut
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