Reserve Bank interest rates

Why wait for the Reserve Bank?

It’s now been five months since the Reserve Bank cut official interest rates to 0.25% in response to the coronavirus pandemic. Yet it’s interesting to see that the possibility of even more interest rate cuts is still being discussed by several economic commentators in the media.

Whilst most homeowners with a mortgage would probably be happy to see another cut to the cash rate, there are probably just as many who would be wondering, how low can these rates go? The biggest question of all, however, is why aren’t there more homeowners getting on the front foot and lowering the interest rate on their home loan themselves, instead of waiting for the Reserve Bank to do it for them?

Here’s some interesting numbers for you. The Reserve Bank has been publishing data on its website to clarify what interest rates Australians are paying on their mortgage. The most recent data shows that the average owner occupier with a variable rate home loan was paying 3.24% at the end of June this year. Yet the average variable interest rate being paid by NEW borrowers in June was just 2.92%. What’s more, the average rate on a new fixed rate loan of three years or less was 2.3%…yes, a full 1% lower than what the average Aussie is currently paying!

There’s a clear message here. If you would like to be paying less on your home loan, don’t wait for the Reserve Bank to act. One simple step is to contact your current lender and let them know that you are considering taking your business elsewhere. If you have been keeping your loan up to date, particularly during the current upheaval, they won’t want to lose your business. So you might be surprised to see what they are prepared to offer. Alternatively, our recommendation is to always chat with an experienced, independent mortgage broker to see what your options are. They won’t cost you a cent to find out, and you might be amazed at what deals some lenders are prepared to offer at the moment to win your business.

Of course, if you are making plans for the future, don’t overlook the value of advice and guidance from an experienced and objective property professional. If you need any property-related help at all, don’t hesitate to call the team at Ian Reid Buyer Advocates on 9430 0000.