Aussies set to save $100 a month starting from Friday

Rate relief for millions of Australians starts on Friday as the first of the big four banks finally pass on the RBA’s rate cut to mortgage holders.

Within minutes of the Reserve Bank of Australia announcing a rate cut 10 days ago, the major banks all raced to follow suit with their announcements.

But finally struggling homeowners will get a rate cut, with three of the four major banks’ rate cuts coming in starting from Friday.

CBA, ANZ and NAB customers’ mortgages will fall by 25 basis points.

Westpac customers’ mortgage rate will change on Tuesday, March 4.

The RBA announced on February 18 it was finally cutting Australia’s official cash rate from 4.35 per cent, where it had been since November 2023.

It is now at 4.10 per cent following a fall in the quarterly trimmed mean inflation rate.

Australians will start to receive rate relief from Friday. Picture: NewsWire / Nicholas Eagar

It will be a relief to millions of households around the country who have been waiting for a reduction in their mortgage payments.

Canstar data insights director Sally Tindall said the delay was not unusual as the banks had a cumbersome legacy system and a large number of customers.

“The key is for banks to be consistent. Certainly, we have not seen it in the past but we are seeing it with this cash rate cut with the banks passing on the cuts at the same pace as they passed on the previous rate hikes,” she said.

ANZ and NAB have typically taken 10 days, while CommBank previously gave customers 17 days before passing on the rate hikes.

Much like with a hike, Westpac is taking the full 14 days to pass on a cut.

According to Canstar data, ANZ comes in with the cheapest variable rate at 5.84 per cent, followed by CommBank with 5.90 per cent. Both NAB and Westpac are charging 6.19 per cent after the rate cuts are passed on.

There’s a catch

While all four of the majors passed on the rate cut, it doesn’t necessarily mean mortgage holders will be paying less on their mortgage each month.

While the majority of Australians with a variable rate mortgage will see their interest rate go down this Friday, CBA, NAB and ANZ customers will not automatically get an adjustment in their variable mortgage payments.

Instead, the three banks will leave it up to borrowers to ask their bank to lower their direct debits.

For those who hold at their current mortgage rate, they will get the benefit of paying off their mortgage faster.

“While this means less interest will be charged on these variable mortgages from Friday, the extra relief won’t translate into lower repayments unless borrowers make contact with their bank and ask it to drop their direct debits,” Ms Tindall said.

“That said, if you can bunker down and keep paying the higher amount, you could potentially save tens of thousands of dollars and pay off your debt months, if not years early,”

The big four banks have passed on in full the rate cut announced by Reserve Bank governor Michele Bullock last week. Picture: NewsWire / John Appleyard

Even for Westpac, which automatically adjusts a person’s direct debit if they are paying the minimum, customers will not see a drop in their monthly repayments until at least the end of March, with most of these borrowers likely to see the reduction in April.

“If you’re a variable borrower, pick up the phone to your lender and ask them what they intend to do with your repayments,” Ms Tindall said.

“While you’re on the phone why not ask for a further discount on your rate – don’t wait for the RBA to serve you one up.”

Will mortgage holders get back-to-back cuts?

Mortgage holders received mixed news on the latest inflation print that is dividing experts on what it might mean for further rate cuts.

The Australian Bureau of Statistics’ January inflation print shows that trimmed mean inflation, which the Reserve Bank takes into consideration, came in at 2.8 per cent, up from 2.7 per cent in December.

Experts are torn as to whether Aussies will get back-to-back rate cuts. Picture: NewsWire Artwork by: Frank Ling

While Wednesday’s monthly CPI figures are only a snapshot, it gives the RBA an indication of where Australia’s inflation rate is heading, with a lower number better for a chance of a rate cut on April 1 when the board next meets.

VanEck head of investment Russel Chesler said another rate cut in the short-term was unlikely.

“While market consensus has shifted towards an 80 per cent probability of the next cut being in May, we don’t see this happening until later in the year,” he said.

“The recent rate cut doesn’t mean we have inflation under control – if anything, we’re going to be walking on eggshells for the rest of the year until we’ve had a solid run of lowered inflation.”

BetaShare chief economist David Bassanese said while an April rate cut was unlikely, odds firmed for a cut in May.

“The best news, however, was that the annual trimmed mean inflation rate only bounced back modestly, from 2.7 per cent to 2.8 per cent, which bodes well for another encouraging quarterly CPI report when it is released in late April,” he said.

“Of course, the monthly CPI can be notoriously volatile and there’s still scope for it to bounce back further in February and March.”

Originally published as Aussies set to save $100 a month starting from Friday