The Big Four banks have confirmed they will pass on the Reserve Bank of Australia’s (RBA) cash rate cut to borrowers in full in the coming weeks. But if you’ve been managing with your current repayments, the cut could be an opportunity to pay off your loan quicker and save thousands.

The 25 basis point cut means owner-occupiers with a $600,000 mortgage and 25 years remaining could save $91 a month on their repayments. That’s based on an average rate of 5.8 per cent being cut to 5.55 per cent.

But if they opted to keep their monthly repayments the same, Vanguard calculations found borrowers could pay off their loan more than a year earlier and save $29,705 in interest over the life of the loan.

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Vanguard Australia chief of personal investor Renae Smith said the rate cut could provide a valuable opportunity for the future for those in a position to do so.

“With cost-of-living pressures continuing to bite, this rate cut offers some welcome breathing room for many households,” Smith said.

It’s an approach millions of borrowers have already taken, with Commonwealth Bank, NAB and ANZ revealing that around one in 10 borrowers had opted to lower their repayments following the May rate cut.

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Westpac is the only one of the Big Four banks that automatically drops repayments for customers paying the minimum amount. The rest of the Big Four banks require customers to ask to lower repayments.

Nexus Loans mortgage broker Jessie Boyce said the strategy could suit borrowers who had some financial breathing room and didn’t need immediate cashflow relief.

“It’s particularly smart for those with long loan terms or owner-occupied properties, where building equity can support future goals like upgrading, renovating, or investing,” she told Yahoo Finance.

“Alternatively, for those wanting more flexibility, parking extra funds in an offset account is a great option — especially for investors or anyone planning to invest in the future.

“It still reduces the interest payable but keeps the funds fully accessible. This is also more tax-effective for investment properties, as it preserves loan deductibility while reducing interest.”

Other ways to use RBA cut to your advantage

Smith said redirecting savings from the RBA cut to paying off credit card debt or investing could be other options.