John Maxwell: Simple mortgage tweak could save $3,000 annually

Australian borrowers were bracing for another blow from the Reserve Bank, and they got it. On Melbourne Cup day, the RBA delivered its fifth rate hike of the year, pushing the cash rate to 4.85 per cent — its highest level since 2008 — and Real Estate reported that the major lenders moved within hours to pass the full increase onto variable home loan customers. What borrowers did not expect, veteran mortgage broker John Maxwell argues, is that the biggest relief available to them has nothing to do with the RBA at all.

The Bottom Line:

On an $800,000 mortgage at 7 per cent over 30 years, trimming just 0.50 percentage points off the rate saves about $266 a month — more than $3,000 a year and roughly $96,000 over the life of the loan.
That annual saving equals nearly half the extra burden the average borrower now carries after five hikes: about $380 a month on a $500,000 loan, $532 on $700,000, and $759 on $1 million.
The cash rate sits at 4.85 per cent, its highest since the GFC, and Macquarie, Westpac, NAB, Commonwealth Bank and ANZ have all confirmed the full pass-through takes effect Friday, November 13.

The Fifth Hike Lands and the Big Four Pass It Straight Through

The RBA’s decision on Melbourne Cup day marked the fifth increase of the year, lifting the cash rate to 4.85 per cent. Macquarie was first to move, and Westpac, NAB, Commonwealth Bank and ANZ all confirmed they would pass the full increase to variable home loan customers, with changes effective Friday, November 13.

The arithmetic is brutal. On a $500,000 mortgage, the latest increase adds about $77 a month, taking the total rise after five hikes to roughly $380 a month. A $700,000 loan gains about $107 a month, for a total of $532. A $1 million mortgage takes on about $153 a month, reaching roughly $759.

The 0.50 Percentage Point Gap Nobody Is Shopping For

Here is the number that matters: half a percentage point. On a hypothetical $800,000 mortgage at 7 per cent over 30 years, cutting just 0.50 percentage points off the rate saves about $266 a month — more than $3,000 a year, and close to $96,000 across the life of the loan. That annual figure is nearly half the extra amount an average borrower must now find each year after five hikes.

“That’s the grocery bill, the kids’ sport, the sleep,” said John Maxwell, co-founder of The Mortgage Coach. “I’m sitting across from people who are lying awake at night, and the only thing they’ve done is ring their own bank.”

John Maxwell’s core claim is that stressed homeowners are fixated on the thing they cannot control while ignoring the thing they can. “A lender can only offer you what’s on its own shelf, and the best rates often go to new customers, not loyal ones,” he said. “It’s easy to blame the RBA, and I get it. But while they’re angry at the thing they can’t control, they’re often ignoring the thing they can. Don’t wear it on the chin.”

Why Loyalty Stopped Paying

John Maxwell said the issue is wider than the headline rate. Loan structure, features and fees all change what borrowers actually pay. “It’s about more than the rate: loan structure, features and fees can all change the picture. And when it’s done properly, people feel the relief straight away, because they finally feel in control again,” he said.

John Maxwell: Simple mortgage tweak could save $3,000 annually

As of Wednesday, some of the top variable rates in the market included Gateway Bank at 6.14 per cent, Teachers Mutual and Newcastle Permanent at 6.19 per cent, Macquarie and MyState Bank at 6.29 per cent, and ANZ and Zeus at 6.33 per cent. Canstar also flagged Southern Cross Credit Union, which announced a 0.25 percentage point increase from Thursday that, if applied across its full range, would leave it among the lowest variable rates at 6.18 per cent.

“Loyalty to your lender rarely pays in this day and age anymore,” John Maxwell said. “Don’t assume the big four are your only options. There are over 100 home lenders in Australia, each with a different appetite for your individual circumstances. Don’t go it alone. An independent review from a mortgage broker can show options you didn’t know you had.”

How the Daily Compounding Works Against You

John Maxwell also pointed to a mechanical detail many borrowers overlook: in Australia, mortgage interest is calculated daily on the compound interest effect. “Mortgage holders are forgetting a crucial trait about their mortgage in Australia. The interest is calculated daily using the compound interest effect. Effectively, it’s the balance of the loan each day which makes a huge difference on where your mortgage will be sitting over the next 15 to 30 years,” he said. “You should learn how your mortgage behaves and more importantly how it should behave when it’s structured to minimise the lender’s interest calculation.”

What the Smart Money Is Watching

With the cash rate at a post-GFC high and pass-throughs already scheduled for November 13, any further tightening narrows the gap between a borrower’s current rate and the best available rate — but as John Maxwell’s numbers show, even a half-point move today is worth more than waiting for the RBA to reverse course.

Disclaimer: The information provided in this article is for educational and market analysis purposes only and does not constitute financial, investment, or legal advice. Always consult with a certified financial professional before making investment decisions.

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