Epic cash saving interest rate cuts will deliver

A cut in interest rates expected to be announced in just days will drive some of the biggest household savings ever due to a quirk in the housing market from Covid.

Homeowners will be able to save record amounts off their mortgages if the Reserve Bank cuts the cash rate in February and follows this up with three more rate cuts widely expected to be announced this year.

PropTrack modelling has calculated how much a homeowner could expect to get back with each cut in every capital city, plus each individual suburb, revealing thousands in potential savings was on the cards.

In many areas, the savings will be much larger than in previous years when rate cuts were announced - due mostly to the much higher debt levels recent homeowners required to purchase their properties.

This was especially true for those who bought in the pandemic-era housing boom in 2020-2022, when more homes were bought with larger loans relative to the value of the properties.

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RBA Governor, Michele Bullock is expected to announce as cash rate cut this month. Picture: Jeremy Piper

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The analysis revealed house owners could get average savings of nearly $500 off their monthly mortgage repayments in Brisbane, Adelaide and Melbourne if there were four cuts this year.

Sydney house owners would save nearly $800 a month in repayments with four cuts – the expectation of three of the big four banks.

It comes as confidence in a first interest-rate cut in February has been growing following months of falling inflation.

The anticipated 0.25 per cent drop in the cash rate, once passed on by banks, is expected to be a game changer for the housing market, which has been losing steam since spring.

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Banks are expecting as many as four cuts this year.

“All else equal, rate cuts are going to help improve affordability, give borrowers a bit more to spend and support home prices,” said REA Group economist Angus Moore.

With three additional cuts expected after February, the impact on household budgets will vary greatly by state, city and suburb:

VICTORIA

Where Victorian homeowners will get the most benefits

Melbourne families in more than 300 suburbs could get $100 a month back into their budgets after a single interest rate cut announcement.

Mortgage holders in Melbourne will get some of the highest savings in the country.

Monthly mortgage repayments could be slashed by anywhere from $30 to $590 a month based on typical house and unit prices across more than 600 suburbs and towns in Victoria.

Homeowners in Melbourne’s most affluent suburbs like Toorak, East Melbourne and Portsea will experience the biggest savings if rates were to be cut.

Meanwhile regional residents in Dimboola, Victoria’s north west, where the median house price is $260,000 will save $30 a month from one cut.

NEW SOUTH WALES

Where NSW homeowners will save most

House owners across Greater Sydney would save an average of about $190 per month from a first 0.25 per cent cut, while unit owners would save an average $100 per month, according to PropTrack.

The savings would rise to $770 a month for house owners if there were four cuts this year – the expectations of CBA, Westpac and NAB – totalling $9240 for a full year of repayments.

Higher debt levels in Sydney have meant households are more vulnerable to interest rate changes.

Unit owners across Sydney would save an average $410 from four cuts – or just under $5,000 over a year.

Suburbs where homeowners would get some of the biggest savings after four cuts (over $1,500 a month) included eastern suburbs Randwick and Paddington.

QUEENSLAND

Where QLD homeowners will get the biggest savings

Homeowners could save up to $400 a month in some of the state’s pricier suburbs after just one rate cut.

Gold Coast homeowners would get some of the biggest Queensland savings.

PropTrack’s suburb-by-suburb breakdown showed homeowners in New Farm and Mermaid Beach on the Gold Coast could be over $1,560 a month better off after four rate cuts.

Brisbane citywide figures showed homeowners paying off a 30-year mortgage for a typical Brisbane house priced at $890,000 would save $120 after one rate cut, and $470 after four.

SOUTH AUSTRALIA

Where SA homeowners get the biggest savings

The owner of a median priced –$820,000 – home in metropolitan Adelaide would see their monthly repayment of $4020 drop by $110 with a single 0.25 per cent cut.

SA families will be in a much better position.

A second interest rate cut would reduce that amount by $210; a third would bring repayments down by $310 a month, while a fourth would mean SA homeowners were paying $410 less per month.

Regional homeowners also stand to benefit, with monthly mortgage repayments on a median-priced house of $460,000 – $2260 – dropping by $60 in the first month, $120 in the second, $180 in the third, $230 in the fourth and $290 in the fifth.