This time last week, the Reserve Bank of Australia (RBA) delivered its second interest rate cut for the year.
The official cash rate was cut from 4.10% to 3.85%.
The big four banks responded by passing on the rate cut in full to mortgage holders.
National Australia Bank Ltd (ASX: NAB) was the first to announce it would pass on its variable mortgage rate, which will come into effect on 30 May. ANZ Group Holdings Ltd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) mortgage holders will also receive a 25 basis point reduction on 30 May. Westpac Banking Corp (ASX: WBC) mortgage holders will have to wait until 3 June to receive their 25 basis point cut.
For those with an average mortgage of $660,000, the call lowered monthly repayments by around $100 a month.
Mortgage holders may be wondering what to do with their spare cash to continue building wealth.
According to Vanguard, Australian shares have increased at a compound annual growth rate (CAGR) of 9.1% over the past 30 years. Therefore, buying ASX shares might be a good place for mortgage holders to park spare cash following the RBA's rate cut.
Here are 2 ASX stocks to consider.
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Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a fast-fashion jewellery retailer with an impressive track record of international expansion. It now operates over 900 stores in 45 countries. Looking forward, broker UBS believes it can continue this trajectory and reach 1,012 stores by the end of 2025.
The past five years have been kind to Lovisa shareholders, with its share price up more than 250% over the time frame. It also offers an attractive dividend yield of 3.21%, which may appeal to those who are also after passive income.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
Those seeking greater diversification may prefer to buy shares in the VanEck Morningstar Wide Moat ETF. This exchange-traded fund (ETF) invests in US companies with sustainable competitive advantages and attractive valuations.
For a management expense fee of 0.49%, the MOAT ETF contains 52 companies, which is plenty of diversification. As of April 2025, it has 25% invested in the healthcare sector, 23% in information technology, 19% in industrials, 14% in consumer staples, 6% in financials, and the remainder across other sectors.
Over the past five years, its share price has risen 55.3%. However, it is also down 8% for the year, which could be an opportunity to buy this strong long-term performer during a dip.
Foolish Takeaway
Following the RBA's latest rate cut, the average Australian mortgage holder will save $100 each month on mortgage payments. Mortgagees may be wondering what to do with these savings to boost their wealth.
Based on the past 30 years, Australian shares have outperformed cash by a significant margin. According to Vanguard, Australian shares have increased at a CAGR of 9.1%, while cash has increased by an average of 4.2% over the same time frame. Instead of parking that $100 in the bank, Australian shares seem like the better option, based on the past 30 years. Those interested in following this strategy might want to consider Lovisa and the MOAT ETF.
