Many are predicting that the Reserve Bank of Australia will cut interest rates in 2025, but there are five key ways you can give yourself a rate cut now.
This report aims to help you to compare home loans by diving into our analysis of 444 home loans from the Mozo Experts Choice Awards for Home Loans 2025.
It’s combined with a survey of 1,000+ mortgage holders, and reveals how borrowers can slash costs – no RBA rate cut required.
Australia’s official cash rate has been sitting at 4.35% since November 2023 – the highest it’s been in over 10 years.
However, after a sustained plateau, we’re starting to see early signs of movement among lenders tracked in the Mozo database, particularly among fixed rate home loans (two- and three-year terms).
The variable rate home loans in our database have been slightly slower to shift, but the average rate has fallen year on year.
In Mozo’s Home Loan Report for 2024, the average variable rate* was 6.83% p.a. (as at March 2024). That figure has now dropped to 6.71% p.a.
A drop of just over 10 basis points may seem negligible, but this small difference can equate to hundreds (or even thousands) of dollars saved on home loan repayments every year – showing the value of every basis point.
No matter what decision the Reserve Bank of Australia (RBA) makes in its February meeting and in the months ahead, mortgage holders have still experienced a significant period of financial strain.
In some cases, Aussies with a home loan could be paying over a thousand dollars more every month than they were back in May 2022 – just before the most recent rate hiking cycle began.
Here’s a look at how this might have impacted someone paying off a $500,000 home loan.
The average variable rate in our database back in May 2022 was 3.02% p.a. With the current average of 6.71% p.a., that’s an extra $1,066 each month on their home loan repayments. An additional $246 a week.
Mozo’s survey asked Australians what their biggest financial concerns are if the RBA does not cut interest rates as expected in February 2025.
Worryingly, 1 in 4 (24%) respondents said “affording mortgage repayments” will be their biggest financial worry if interest rates don’t come down.
But it’s not just mortgage repayments that are weighing on Aussie’s minds. Almost half (44%) are concerned with a “higher cost of living” if the RBA doesn’t move the cash rate.
If you’re one of those Australians, now’s the time to be proactive and look for ways to cut back and save money this year.
You can start by taking stock of all your regular bills such as energy, car insurance, mobile and internet, and even groceries.
Want to learn more? Read our research reports on the cost of energy, car insurance and mobile and internet.
The RBA is on hold, but homeowners don’t have to be.
With interest rates continuing to be a concern for many homeowners, it's essential to know how you can take control and potentially secure a better deal. Whether you're locked into a fixed rate or dealing with variable rates, there are several ways that you could give yourself a rate cut – without waiting for the banks to offer you one.
By exploring alternative lenders, refinancing options, and other strategies, you can reduce your monthly repayments and put more money back into your pocket.
Mozo research shows that the average interest rate offered by Mozo’s award-winning lenders is 16% lower compared to the Big Four’s average rate of 7.15%p.a.*.
Despite this, data from the Australian Prudential Regulation Authority (APRA) shows 73% of Australian mortgage holders are still with a major bank.
When completing the 2025 Mozo Home Loan Experts Choice Awards, experts highlighted the domination of banks that were not in the Big Four.
50% of the winners were mutual banks, 15% were credit unions, and 17% were non-bank lenders – proving that a switch from the major banks could lead borrowers to much lower rates, and significant savings.
Ready to switch? Compare home loans now.
Homeowners struggling with repayments don’t have to wait for the RBA in order to save money on their mortgage – you could give yourself a rate cut now by switching to a Mozo winner.
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. This represents a saving of 0.32% (32 basis points) compared to the average fixed rate of 6.04% p.a. across all lenders in the Mozo database.
In dollar value that’s approximately a $98 per month saving on a $500k loan.
| Lender Type | Average Rate (p.a.) | Monthly Repayment |
|---|---|---|
| All lenders in the Mozo Database | 6.04% | $3,234 |
| Big Four Banks (NAB, ANZ, Westpac, Commbank) | 6.09% | $3,249 |
| Mozo Experts Choice Award Winners | 5.72% | $3,136 |
Source: Mozo database. Accurate as at 12 Feb 2025, average fixed rates for owner occupier, principal & interest home loans, interest paid over a 25 year loan term, 80% LVR, $500,000 loan amount. Average for MECA Winners based on the rates of MECA winning products on 12 Feb 2025, using the same criteria.
Looking at Variable Rates:
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 variable 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.
| Lender Type | Average Rate (p.a.) | Monthly Repayment |
|---|---|---|
| All lenders in the Mozo Database | 6.71% | $3,441 |
| Big Four Banks (NAB, ANZ, Westpac, Commbank) | 7.15% | $3,582 |
| Mozo Experts Choice Award Winners | 6.01% | $3,224 |
Source: Mozo database. Accurate as at 12 Feb 2025, average variable rates for owner occupier, principal & interest home loans, interest paid over a 25 year loan term, 80% LVR, $500,000 loan amount. Average for MECA Winners based on the rates of MECA winning products on 12 Feb 2025, using the same criteria.
Generally speaking, banks and lenders offer lower interest rates to borrowers with a lower loan-to-value ratio (LVR). But what is LVR, and why does it affect your interest rate?
When you first take out a home loan, your loan-to-value ratio indicates the amount you need to borrow as a percentage of the property’s value. So, if a property is selling for $1 million and you have a deposit of $200,000, you have an LVR of 80%.
As you pay down your home loan, your LVR is also likely to decrease, so another way to think of LVR is the percentage of property value that is owned by you – this is known as your home equity.
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.
Lenders offer lower interest rates to borrowers with lower LVRs because they’re assessed as being ‘safer’. In this way, your LVR is a powerful bargaining chip when looking to get a better rate on your home loan – use it to your advantage.
The table below gives a clear indication of how you can lower your monthly mortgage repayments with a lower LVR.
| LVR | Average LVR Specific Variable Rate | Total Interest Payable | Monthly repayment |
|---|---|---|---|
| 60% | 6.20% | $645,830 | $4,372 |
| 70% | 6.42% | 673,071 | $4,462 |
| 80% | 6.42% | $673,071 | $4,463 |
| 80% | 6.70% | $708,116 | $4,580 |
| 95% | 7.27% | $780,718 | $4,823 |
Source: Mozo.com.au as at 12 Feb 2025, average LVR specific variable rates for owner occupier, principal & interest home loans, interest paid over a 25 year loan term. Average new loan size of $665,978 taken from ABS Lending Indicators data Average Loan Sizes for Owner Occupier Dwellings, December 2024 – released 12th February 2025.
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.
When looking at the popularity of fixed and variable rate home loans for owner-occupiers, the number of fixed rate loans has reduced in the December 2024 quarter. This is because many borrowers have rolled off their much lower fixed rates onto higher variable rates.
However, with the RBA cash rate at the peak of the hiking cycle, banks have been lowering fixed rates in an effort to secure new customers before interest rates begin to drop.
"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," says Rachel Wastell, Mozo's money expert.
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 a rate starting with ‘5’ now.
Among Mozo’s fixed home loan winners, the average rate in the two-year and three-year categories is currently 5.72% p.a.
Let’s say you owe $500,000 on your home loan.
For our example, we’ll propose the RBA cuts the cash rate four times over the next two years, and each time it slices off 0.25% – equating to a 1.00% reduction to the official cash rate over two years.
This scenario is similar to what the majority of the Big Four banks are forecasting over the next 24 months – we’ve gone into detail in our guide to when interest rates will come down.
We’ll also assume that all lenders will pass on these rate cuts to their customers for our example.
If you split your $500,000 home loan in half and have $250,000 on a Mozo-winning variable rate of 6.01% p.a., after one year you could be paying 5.51% p.a., and in the second year, you may end up with a rate of 5.01% p.a.
If you’re one of the 74% of Australians who have their mortgage with a Big Four bank – which collectively have an average variable rate of 7.15% p.a. – even a total rate cut of 1% will still mean you are paying more than the average rate among Mozo winners.
If the other half of your home loan is fixed at 5.72% p.a. – that’s the average rate of Mozo’s Home Loan winners on two-year terms – then you’re still able to hedge your bets and benefit from a lower-than-average fixed rate.
Another benefit of splitting the loan, rather than committing to a 100% fixed rate, is that a split loan 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.
We’ve detailed how a split home loan can benefit some borrowers, but do Australians ever consider using this approach to save money on their mortgage?
According to our survey, 1 in 5 respondents (22%) simply “didn’t know you could do that”. Only 14% reported already having a split home loan.
The number of respondents unsure of what a split home loan is raises the issue of financial literacy, and highlights how a lack of understanding can hurt those it would benefit the most.
Sometimes, the true cost of your home loan isn’t just in the interest rate – it’s in the fees that can sneak up on you.
If you’ve explored all other options, another method to save money on your mortgage is to check your fees. This may not be an official “rate cut”, but by checking for fees you don’t need to be paying and switching to a loan with lower or no fees, you can effectively lower your loan's total cost, which can feel like an unofficial rate cut.
For example, an offset account is a home loan feature that can help you save money by reducing the amount of interest you need to pay.
Mozo analysis revealed that while some home loans charge no additional fee for an offset account, those with an optional offset account can charge anywhere from $5 per month to $395 a year!
If you find that you’re paying for the privilege of having an offset account, it might be time to consider switching, or calling your lender to negotiate.
We recommend checking your home loan statement to get a clear understanding of money going in, money going out, and any fees you might be getting charged.
This report is based on Mozo’s in-depth analysis of 444 home loans from 97 lenders as part of the Mozo Experts Choice Awards for Home Loans 2025, which identifies the most competitive rates and products available.
The Mozo Experts Choice Awards were established in 2014 to help Australian consumers find the best value across a range of financial products. For the home loan awards, Mozo’s experts assessed products using data from Mozo’s product database as of January 2025. Read the full methodology report here.
To complement this analysis, Mozo also commissioned a nationally representative survey of 1,021 Australian mortgage holders – conducted between December 2024 and January 2025 via PureProfile – to better understand borrower behaviour, attitudes toward refinancing, and the savings potential in the current market.
Average variable rates in the Mozo database in this analysis were based on owner occupier home loans, paying principal and interest over a 25 year loan term. Apart from the LVR rate cut section, all variable rates were based on LVRs of 80%.