The Rate Escape: 5 DIY Home Loan Rate Cuts for borrowers

New research from Mozo out today reveals that mortgage holders waiting for the Reserve Bank to cut interest rates next week could be missing out— as the savings on offer by making their own “rate cuts” could save them much more than an official Reserve Bank of Australia (RBA) cut.

Mozo money expert Rachel Wastell warns that waiting for an RBA rate cut could be a costly mistake. 

“Many borrowers assume the RBA cut is what they need most, when there’s actually greater savings potential for those who make a few DIY cuts ,” Wastell said.

“If you've been hanging out for a rate cut from the RBA, now is the time to take matters into your own hands. The biggest savings often come from making proactive changes of your own, rather than relying on the RBA to move.”

Mozo’s Home Loan Report for 2025 -“The Rate Escape” - was compiled after experts analysed 444 home loans from 97 lenders and surveyed 1,000+ mortgage holders, as part of the Mozo Experts Choice Awards for Home Loans 2025.

The report details how much mortgage repayments have skyrocketed since the rate hiking cycle began, what Aussies are worried about if the RBA doesn’t cut next week as well, and five do-it-yourself rate cuts that could shave hundreds off monthly home loan costs. 

1 in 4 need a cut to afford repayments 

Mozo’s survey of 1,021 mortgage holders found that if the RBA keeps rates on hold in February 2025, affording mortgage repayments will be the second biggest financial concern for 1 in 4 Australians (24%)—behind only the higher cost of living (44%).

Back then, the average variable rate in Mozo’s database was 3.02% p.a., but today it’s 6.71% p.a.—a staggering increase that’s added an extra $246 per week to repayments on a $500,000 loan.

“Aussies borrowers have had to find hundreds of dollars more every week to make ends meet, since the hiking cycle began back in May 2022,” says Wastell. “So it’s no surprise that many homeowners pushed to the brink with rising costs are under financial pressure to keep up with high rates.”

Don’t Wait for the RBA: 5 Ways to Give Yourself a Rate Cut

Markets are pricing in a high chance of an RBA rate cut next week, but it’s not guaranteed. Instead of waiting on a 0.25% RBA cut that may or may not come, mortgage holders could take matters into their own hands with a few DIY rate cuts.

“A rate cut from the RBA would be welcome, but why wait when you could save more by taking action now?” said Wastell. “Shopping around, negotiating, and tweaking your loan could put thousands back in your pocket—no central bank decision required.”

Rate Cut #1: Go beyond the usual suspects

The research in the report reveals a stark reality: despite more competitive options in the market, 73% of borrowers remain with a big four bank— where rates are often higher than those offered by challenger lenders. Mozo’s analysis found that the lowest variable rate from a major bank sits at 7.15%p.a., while the lowest cost home loans (Mozo Experts Choice Award winners) offer rates 16% lower on average.

“Smaller lenders, including mutuals and online banks, often offer more competitive rates. Mozo’s data shows switching to a leading customer-owned bank could slash up to half a percent off your rate—double the expected RBA cut.”

Rate Cut #2: Switch to a Mozo winner

Each year, Mozo’s Home Loan Awards spotlight the best-value lenders, and the data shows moving from the average variable rate to an award-winning lender could save you$217 a month.

Looking at 2 year fixed rates, borrowers who choose a Mozo award-winning fixed rate can secure an average rate of 5.72% p.a. – a saving of 0.32% (32 basis points) compared to the average rate of 6.04%p.a. across all lenders in the Mozo database. 

In dollars, that’s approximately a $98 per month saving on a $500k loan over a 25 year loan term.

For variable rates, borrowers can secure an average rate of 6.01% by opting for one of Mozo’s low-cost Home Loan Experts Choice Award winners. This is a saving of 0.70% (70 basis points) compared to the average rate of 6.71% across all lenders in the Mozo database.

In dollars, that's about $217 you could save in monthly repayments on a $500k loan  over a 25 year loan term.

Rate Cut #3: Check your LVR

If you’ve been paying off your mortgage for a few years now, you’re likely to have a lower loan-to-value ratio than you did when you were first approved for your home loan, and Mozo’s latest research shows borrowers with an LVR under 60% typically access rates 0.22% lower than those at the 80% tier. 

Homeowners with an LVR of 60% have access to an average variable rate of 6.20% p.a., compared to 6.70% p.a. for those with an 80% LVR (according to the Mozo database). This difference can add a staggering $62,286 in extra interest over a 25-year loan term. 

The biggest hit comes for those with an LVR of 95%, who are charged an average rate of 7.27%—more than a full percentage point higher than the lowest tier—bringing total interest costs to $780,718 and monthly repayments to $4,823. This equates to $134,888 more in interest costs than a 60% LVR borrower. 

“Borrowers with lower LVRs are being rewarded with significantly lower interest rates, which can mean saving over $130,000 in interest over the life of a loan,” says Wastell. “However, most banks won’t automatically switch you to it.” 

“It’s worth checking your equity and asking your lender to reduce your rate to match what they’re offering new customers with lower LVRs.

Rate Cut #4: Split your loan

If you don’t want to switch lenders, or you can’t decide whether to commit to a fixed or variable rate, you could split your loan. A split home loan is when you separate your mortgage into two portions – one part with a fixed rate and another part with a variable rate.

“The advantage of a split loan for some borrowers is that you can lock-in the certainty of a fixed interest rate while also getting the flexibility of a variable rate,” explains Wastell.”

“If the RBA cuts the cash rate, you could benefit from the variable portion if your lender decides to pass on those rate changes. In the interim, the fixed portion of your home loan could lock-in at a rate starting with ‘5’ now.”

“Another benefit of splitting the loan is it can give you more flexibility. Many banks limit redraws or don’t offer offset accounts on fixed loans, so by keeping part of your loan on a variable rate, you can still use features like an offset account or redraw facility to save on interest.”

Rate Cut #5: Check your fees

To truly understand the cost of your home loan, borrowers should also be looking beyond just the interest rate and pay attention to the fees attached to home loans. Mozo analysis revealed that some lenders can charge as much as $395 a year in annual fees.

"Reviewing your home loan fees could save you more than you think," says Wastell. “By taking a closer look at the fees you’re paying, you could find you’re forking out hundreds of dollars more than you need to.”

“If you’re paying for an offset account or you find hefty services fees are being charged, switching to a loan without those fees can feel like receiving an unofficial rate cut.”

Notes:   Mozo commissioned a nationally representative survey of 1,021 Australian mortgage holders - conducted between December 2024 and January 2025 via PureProfile. Mozo’s experts also analysed 444 home loans, issued by 97 lenders, based on data contained in Mozo’s product database as at January 2025. Read the methodology report here.