After more than six months of will-they-won’t-they, on-again-off-again signs, the RBA has finally pulled the trigger and cut the cash rate by 0.25% to 4.10%.

Good news, right? Absolutely! A little financial relief after the past couple of years is very welcome.

But if you really want to capitalise on this rate cut (and the future rate cuts),  you need to make sure you’re being proactive. 

Here’s how to turn a small rate cut into a big financial win.

1. Keep Your Loan Repayments the Same

When rates drop, your bank might offer you the option to reduce your monthly repayments. And hey, a little extra cash in your pocket each month might sound tempting.

But here’s the thing: if you can afford to keep paying the same amount, you should. Because it means, you’ll be paying off more of your loan principal and you’ll be mortgage-free years sooner.

For example, let’s take a homeowner with a $500,000 loan over 30 years at an interest rate of 6.1%. They will be paying ~$3,030 per month in home loan repayments.

If the interest rate dropped to 5.85%, but they kept their loan repayments the same (ie $3,030), they would cut ~~2 years off the 30-year mortgage.

If the interest rate dropped to 5.2% over the next year, but they kept their loan repayments the same (ie $3,030), they would cut more than 6 years off the 30-year mortgage.

2. Consider Refinancing

Banks love making money off you, but they’re not always quick to pass on full rate cuts. That means if you haven’t checked your loan rate in a while, you could be paying more than you need to.

The cheapest lender is always changing, so now is the perfect time to scan the market and see if you can get a better deal.

Step 1: Call your bank and tell them you’ve found a cheaper loan.

Step 2: Say you’ll switch lenders unless they match (or ideally, beat) the lower rate.

Step 3: If they won’t budge, actually refinance and save thousands in interest.

This one phone call could save you thousands of dollars per year. The banks won’t offer you a better deal unless you ask—so ask.

3. Check Your Borrowing Power

Lower interest rates increase the amount banks are willing to lend you. That doesn’t mean you should max out your credit limit and start house-hunting in the most expensive suburbs, but if you were already thinking about upgrading your home or getting into the market, this could be the right time to check your borrowing power.

Even a small drop in rates can boost how much a bank is willing to lend you—so if buying or upgrading is on your radar, now’s a smart time to run the numbers.

All good things come to an end

Just like rate hikes eventually ended, rate cuts won’t last forever. At some point, the cycle will shift again, and rates will rise.

If you’re taking out a loan or investing, make sure you’re not just banking on rates staying low forever. Always plan for the future—the smartest financial moves are the ones that set you up for the long term, not just the next six months.

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Flux Technologies Pty Ltd (ABN 86 634 507 172) is an authorised representative (Representative No. 525288) of Mozo Pty Ltd who is the holder of AFSL No. 328141. We also provide general advice on credit products under our own Australian Credit Licence No. 530103.