Mortgage Choice, Best in the Mortgage & Finance Industry*, is very pleased about the Reserve Bank of Australia (RBA) decision to decrease the cash rate by 1.0% to 6.0%, the same level it was in August 2006.
The move will bring a collective sigh of relief from the millions of Australians who are repaying a variable mortgage at a time when interest rates, fuel, food and other commodities are at a high.
Volatile global funding markets have resulted in a liquidity crisis that has seen Australia’s lenders experiencing see-sawing funding costs. So, there are no guarantees as to how they will move rates.
If lenders follow the RBA and cut mortgage rates by 1.0%, a borrower previously owing $250,000 at 9.35% over a 25-year term will save approximately $171 per month on their repayments.
However, if that same borrower kept their repayments at the same level and ignored the rate cut, they would save approximately $86,143 in interest and approximately five years and four months off the remaining term of the loan.
If lenders cut mortgage rates by 0.5%, a borrower previously owing $250,000 at 9.35% over a 25-year term will save approximately $86 per month on their repayments.
Mortgage Choice
home loan franchise National Corporate Affairs Manager, Warren O’Rourke said, “I am often amazed at the difference a couple of extra notes a month can make to a loan. Many people don’t realise how large a dent they can put in their mortgage simply by ignoring a drop in repayment amount”.
“I would suggest to those borrowers who find their lender hasn’t matched the rate cut that they start looking around at other lenders and loans to check for a better deal.
“A number of reputable mortgage brokers such as Mortgage Choice offer free home loan health checks, which means they check the current loan against a wide range of others from a panel of lending institutions. It’s worth a quick visit to make sure you’re doing the best thing by your budget”.
The next round of inflation figures will be released on 22 October. This information will have a strong influence over the RBA as to its next decision on the cash rate.
The committee decided to reduce rates last month because it believed inflationary factors had been significantly curbed. The next round of CPI figures will give the RBA a much stronger idea as to the effect recent rate increases had on our economy.
10-Oct-2008