Which is great news for home owners with a mortgage – and an important opportunity for people to refinance their home loans to get the best rate possible.

Here’s a rundown of some of the financial institutions with the most compelling offerings.

Have the banks passed on the RBA rate cut?

Dominic Beattie, editor of loan portal savings.com.au, notes most lenders have passed on the full 0.25 per cent cut to the cash rate the RBA made this month. “By comparison, fewer than half the lenders passed on the full 0.25 per cent cut to the cash rate when it was lowered in October.”

He notes there are more than 100 lenders in the market in Australia, so there’s a lot of competition. “About 80 per cent of borrowers get their loans from the big four. So challenger banks and non-bank lenders are trying to shake up the status quo by offering really competitive home loan interest rates.”

When it comes to passing on any cut to the cash rate the RBA makes in April, Beattie says institutions with riskier customers or those without a big deposit base may not pass on as much of the rate cut as some of the banks with stricter lending criteria.

Some of the smaller, customer-owned banks also don’t have as much capacity to pass on rate cuts. This is because they rely on their net interest margin to make a profit. The net interest margin is the difference between what they pay to their deposit customers and what they charge to borrowers on their home loans.

“Whereas, smaller, non-banks have the flexibility through the securitisation markets and other funding sources to pass on that 25 basis point cut,” Beattie said.

Upfront costs calculator

Find out how much you could put towards your deposit.

Calculate

Repayments calculator

See how much your monthly repayments would be.

Calculate

Equity calculator

Calculate how much equity you may be able to access.

Calculate

Domain Loan Finder, Credit Representative 500208 of Auscred Services Pty Ltd, Australian Credit Licence 442372.

Which banks have the lowest interest rates?

For mortgages being refinanced, loans.com.au is offering the best variable comparison rate at time of writing, with a rate of 2.55 per cent, based on a loan-to-value ratio of less than 75 per cent.

Athena is also offering a variable rate of 2.55 per cent for owner-occupiers with a principal and interest loan.

Ubank has a comparable variable rate of 2.84 per cent for its owner-occupier, principal and interest loans of more than $200,000.

Westpac is the most competitive big bank, with a comparable variable rate of 3.29 per cent on its principal and interest loans.

Archer Mortgage Group finance broker Jasjeet Makkar says borrowers should not be concerned that taking out a loan with a non-bank lender is any more risky than taking out a loan with a big player. “Many are backed by a bank.” For example, Ubank is backed by NAB.

Also, thanks to the financial services royal commission, many non-banks conform to the same responsible lending guidelines as the big banks.

Should you refinance now or later?

If you’re thinking of refinancing, it might be a good idea to wait until next month when the RBA is expected to drop the cash rate to 0.25 per cent. It can take a few weeks after a rate cut for all the financial institutions to announce their new rates. So borrowers can take their time approaching their banks about refinancing.

It’s worth doing the legwork to compare rates yourself – even if you are working with a mortgage broker. Also remember the absolute cheapest rate might not be the best fit for you. For instance, really cheap loans may not include features like an offset account.

Akshaya Naronikar, chief executive of mortgage broking firm Iridium Private, agrees that getting the best mortgage product is not always about the rate. “There are other variables to consider, such as whether the loan gives you access to an offset account linked to the home loan. Funds in the offset account will reduce the interest you pay on the mortgage. ING’s loan doesn’t offer this feature.”

Everyone’s situation is different and the right loan will depend on individual circumstances. But Beattie says fixing your rate might be sensible if you want to reduce your interest over time.

“The RBA is probably only going to cut the cash rate one more time. That could be the bottom of the market. So it may be an opportunity to lock in a really cheap, fixed-interest rate for three years.”

ING is leading the fixed market at the moment with a rate of 2.49 per cent over three years.

But keep in mind fixed loans generally limit your ability to make extra repayments. You’ll also face break fees of thousands of dollars if you want to get out of the loan.

Whatever your circumstance, it’s certainly worth shopping around to get a feel for the market and talking to your financial institution or mortgage broker about whether you can get a better rate on your home loan.