Given that 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. However, there is a way that homeowners can look at cutting the cost of their mortgage that doesn’t rely on the Reserve Bank…so we’ve got to ask ourselves, why aren’t more people taking that step?
For those that are keen to know what’s happening with interest rates at the moment, the Reserve Bank regularly updates information on its website so that we can all see what our fellow Australians are actually paying on our mortgage loans.
The most recent data shows the numbers up to the end of June this year, and they show that the average owner occupier with a variable rate home loan was paying 3.24% at that point. However, when you look at the average variable interest rate being paid by NEW borrowers at that time, (which included people refinancing an existing loan), it was just 2.92%. If that doesn’t make you go “hmmmm”, the average charge on a new fixed rate loan of three years or less was 2.3%! No, it’s not a typo, that rate is more than 1% below what the average Aussie is currently paying!
So here’s a simple tip for anyone trying to make the household budget go further in the midst of the lockdown. If you’d like to pay less on your home loan, don’t wait for the Reserve Bank to act. You could start by giving your current lender a call and letting them know that you are considering taking your business elsewhere. If you’ve been keeping your loan up to date during the recent lockdown, they won’t want to lose your business, so you might be surprised to find out how flexible they might be.
A more effective alternative is to have a chat, (even if it’s online), with an experienced, independent mortgage broker to find out what your options are. There’s no cost to have that chat, and some of the deals that the lenders are offering at the moment in order to win your business could make a serious positive impact on the family budget. What have you got to lose?
Of course, if you are making plans for the future, the team at Barry Plant Caroline Springs and Taylors Lakes 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 on 9390 8333?
James Hatzimoisis & John Aaron Nakic
Directors – Barry Plant Real Estate
Taylors Lakes, St Albans & Caroline Springs