Here’s how to make it work for you
After more than four years without a rate cut, the Reserve Bank of Australia (RBA) has lowered interest rates by 0.25 to a 4.1% cash rate, providing a long-awaited reprieve for Australian mortgage holders.
Kate Browne, Head of Research at Compare Club, said: “We know from our research that Australian mortgage holders have been feeling the pressure over the last few years and this cut will provide much needed relief, even if it’s relatively small. This decision, if passed on in full, will reduce the repayments on a $600,000 mortgage by $92 a month.”
“When the RBA cuts rates, you have two choices: take the short-term relief of lower repayments or stay the course and save big in the long run.
Browne says that mortgage holders take some extra steps to maximise the savings on their loans by asking their current lender for a better rate, comparing and switching to a lender with a better rate or looking to move from a variable to a fixed rate.
“Before today’s rate cut we’ve already seen a number of lenders introduce lower rates on both variable and fixed rate loans. Our message is take action now and secure the very best rate you can find. While fixed rates may mean missing out on future cuts, many borrowers are already stretched thin with variable repayments. A fixed loan can be a good option for those who need certainty over their monthly costs. No matter your situation a good mortgage broker can review your current loan, find the best rates on the market and ensure you’re the absolute best bang for your buck. The good news is you can do this straight away, there’s no need to wait for the RBA or your current lender to make the first move.”
Browne also urges homeowners who are coping with their current mortgage repayments to continue paying at the old rate as the extra money will help cut down on the interest paid and reduce the time of the loan.
“If you can afford it, keeping your repayments steady is one of the simplest ways to shave years off your mortgage and save tens, if not hundreds, of thousands of dollars. So if you can afford to, celebrate this cut for a moment then, pretend it never happened. Your future self will thank you.”
Tips to get ahead on your mortgage
1. Call your bank and haggle
You don’t need to wait for the RBA. Pick up the phone and ask your bank for a better deal. You’d be surprised how often lenders will throw you a rate cut just to keep your business. And if they don’t budge, it’s time to shop around and refinance with a lender who will. An experienced mortgage broker can help you there.
2. Review your bills
Your mortgage isn’t the only bill you can negotiate. Put some time in on the weekend to review your electricity, gas, internet, and even mobile phone plan. Then, take your savings and put it straight into your mortgage – better still, add it into your offset if you have one. An extra $50 a month can add up to thousands over time.
3. Switch to fortnightly repayments
A simple but effective trick: instead of paying your mortgage monthly, switch to fortnightly. Some banks just divide your monthly repayment in half, which won’t change much because you’re not actually paying in any more money to your loan.
4. Consider fixed rates
While another cut could be on the cards, the good news is banks have started reducing fixed rates and there are some very attractive rates if home loan holders are considering refinance options.
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