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Homeowners with a mortgage dodged a bullet this week when the Reserve Bank of Australia board chose to hold its official cash rate at 4.35%.

The reprieve may prove short-lived, though, with a number of economists and financial markets seeing a good chance of another hike this year.

That would add to the three RBA rate hikes earlier this year, which have all piled further pressure on indebted households already struggling with high cost of living.

The best defence, as they say, is offence. There is talk that lenders are starting to compete more fiercely for customers, including by offering better deals.

Let’s take a look at what’s happening, and how you could benefit.

Are the ‘mortgage wars’ back?

Unfortunately, no. At least, not yet.

The mortgage wars raged through 2022 and into 2023 as the Reserve Bank delivered a rapid series of interest rate hikes that had homeowners scrambling to find ways to reduce their borrowing costs.

Those who refinanced or took out new loans at the time will remember fondly the generous cashback offers as even the big four competed hard for customers.

What we have today is more like an early skirmish; a few opening shots from smaller lenders that could develop into something more if more of us really start to push for a better deal.

Matt Comyn, the CEO of the Commonwealth Bank, told analysts on Wednesday morning he had seen “a little bit more of the re-emergence of the cashback” amid “a lot of pricing activity in the market”.

But Comyn also made it clear that the bank was not about to start chasing new business at the expense of profitability – something that was happening four years ago.

Still, there is movement, and canny borrowers should be looking for the opportunity to grab a better deal.

At the start of the year, competition between lenders for mortgage customers was “as dead as a door nail”, according to Sally Tindall, Canstar’s director of data insights.

But Reserve Bank rate hikes in February, March and May, followed by the government’s investor tax changes, have triggered a sharp drop in demand for new home loans.

There are now 49 lenders offering at least one variable home loan at a rate below 6%, according to Canstar, which is 11 more than at the start of June.

Canstar’s survey of 82 lenders shows the lowest variable rate for a new owner-occupier home loan (so not an investor) is 5.69%. The average is 6.26%.

“It [competition] absolutely has been ramping up, and the momentum is increasing,” Tindall says.

So how much could I save by refinancing?

It depends on what rate you have now and what you can negotiate, but there are savings to be made, especially if you haven’t looked at your mortgage for some years.

For example, let’s say you took out your loan in 2021, and haven’t revisited it since.

You could be paying interest of 6.97% (the going rate five years ago, plus intervening moves in the RBA’s cash rate).

If you still owe $600,000, you could save more than $10,000 over the next two years if you refinanced to a loan charging interest of 5.99% (this is where many of the sub-6% offers have clustered).

And that’s including an assumed $1,150 in switching costs, although not ongoing fees.

As ever, you need to do the numbers yourself or get a broker to do them for you.

The example above is Canstar’s, but Asic’s Moneysmart website has a host of useful and really easy to use calculator tools that will let you compare repayments to see how much you might be able to save.

For example, if you are starting from a much lower rate of 6.17% and move to a 5.99% rate, the savings dwindle to $1,584 in lower repayments over two years.

That’s not much more than the assumed $1,150 in switching costs. Add on $10 a month ongoing fees, and you’re not much ahead – although the benefits would grow over time.

What’s the Reserve Bank’s next move?

The RBA’s governor, Michele Bullock, on Tuesday afternoon said inflation was still too high and it was “quite possible” that the board may need to raise interest rates again this year.

Financial markets the next morning were pricing in a 60% chance of a rate hike by the end of the year, up from 50% the day before.

Higher official interest rates are definitely on the table, says Jonathan Kearns, the chief economist at Challenger, and he’s not alone among RBA watchers, who tend to put November as the most likely time for any increase.

Economists at the four major banks, however, all argue that the RBA is done, and that the next move in rates will be down – albeit not until the back half of next year.

Whether the RBA does or doesn’t lift borrowing costs, one thing’s for sure: the easiest way to defend yourself against more rate hikes tomorrow is to get a better deal today.