It’s now been five months since the Reserve Bank cut official interest rates to 0.25% in response to the coronavirus pandemic. Some economic commentators still believe there’s scope for more cuts, but there is a way that homeowners can potentially cut the cost of their mortgage without relying on the Reserve Bank. The burning question is…why aren’t more people taking that step?
One way to gain some insights into what is currently happening with interest rates is to take a look at the Reserve Bank website. They provide regular updates on what people are actually paying on their home loans, which seems like a more reliable source of information than advertising from the lenders.
The most recent figures on the website include data up to the end of June. These show that the average variable rate home loan for an owner-occupier is charging 3.24%. Yet when you look at the average variable interest rate being paid by NEW borrowers at that time, (this includes people refinancing an existing loan), the interest rate was 2.92%. And if you think that difference is interesting, you’ll also find that the interest rate on a new fixed rate home loan of three years or less was 2.3%! Yes, you read that right…that’s more than 1% under what the average Aussie is currently paying!
So here’s a simple idea for anyone who is keen to stretch the household budget further in the middle of the lockdown. If you’d like to cut the cost of your home loan, don’t leave it to the Reserve Bank. You can start by getting on the phone to your current lender and let them know that you’re thinking about taking your business elsewhere. If you’ve kept your loan up to date during the recent lockdown, they won’t want to lose your business and chances are they will look at offering you a better deal.
Another way to tackle this opportunity is to contact an experienced, independent mortgage broker to find out what your options are. Don’t worry, you can do that online or over the phone. There’s no charge to have that chat, and you’ll discover that some of the deals that the lenders are offering at the moment in order to win your business are really impressive. After all, what have you got to lose?
Of course, if you are making plans for the future, the team at Barry Plant Cranbourne are always happy to assist, whether you have questions about the current market or you are simply keen to get an update on your property’s current value. Why not give us a call this week?
Barry Plant Real Estate
Cranbourne & Frankston