RBA issues first rate rise of 2008 amidst global turmoil

With today’s Reserve Bank’s decision to increase interest rates by another 0.25%, the average Australian home owner is now under even greater pressure to meet mortgage repayments.

Today’s 25 basis point rise means home owners will have to find an extra $42 per month on an average $250,000 loan. This figure jumps to an extra $59 per month if the loan is $350,000.

There is a strong likelihood that further rate rises are not far away, so home owners should be looking at refinancing to get the best deal possible. Even those who will face exit fees may be better off making the move to a different lender if they are paying a relatively high rate. Long term, the savings from being on a lower rate can really add up. Over 25 years, someone on 8.0% would save over $1,000 each year than someone on 8.5% - that’s a whopping saving of $25,059 over the life of the loan.

Monthly Repayment Schedule

 

Interest Rates

Loan Amounts

7.50%

7.75%

8.00%

8.25%

8.50%

8.75%

9.00%

$150,000

$1,108.49

$1,132.99

$1,157.72

$1,182.68

$1,207.84

$1,233.22

$1,258.79

$250,000

$1,847.48

$1,888.32

$1,929.54

$1,971.13

$2,013.07

$2,055.36

$2,097.99

$300,000

$2,216.97

$2,265.99

$2,315.45

$2,365.35

$2,415.68

$2,466.43

$2,517.59

$350,000

$2,586.47

$2,643.65

$2,701.36

$2,759.58

$2,818.29

$2,877.50

$2,937.19

$400,000

$2,955.96

$3,021.32

$3,087.26

$3,153.80

$3,220.91

$3,288.57

$3,356.79

$450,000

$3,325.46

$3,398.98

$3,473.17

$3,548.03

$3,623.52

$3,699.65

$3,776.38

$500,000

$3,694.96

$3,776.64

$3,859.08

$3,942.25

$4,026.14

$4,110.72

$4,195.98

$1,000,000

$7,389.91

$7,553.29

$7,718.16

$7,884.50

$8,052.27

$8,221.44

$8,391.96

based on loan repaid in 25 years


However, if you’re one of the 60% of Australians with a package loan and who utilises the products offered within that package, you may well be better off than with an individual product. While the average package loan interest rate is around 8.32%, if you don’t need all the bells and whistles a package loan offers, you can shop around for the cheapest variable rate loan. This is currently 7.60%, saving you $1,800 each year on a $250,000 mortgage.

There really is no excuse for paying top dollar when shopping around for a better deal has never been easier.Hundreds of lenders and thousands of products can be compared within minutes on RateCity.com.au for free.

Of course we’re all too aware that exit fees could hamper your efforts to switch lenders, but even with these fees taken into account, often you will be better off switching. The chance of another rate rise in the coming months is high, and unless we see inflation drop we could be looking down the barrel of another RBA increase sooner rather than later.

But it’s not all bad news. Deposit accounts and online savers will benefit from another boost in interest rates, encouraging people to save. That in itself should help curb inflation to some degree. Keep your eyes peeled in the coming months as we could see some of the highest savings interest rates in a long time.

How do I compare home loans?

RateCity.com.au is the best website to shop for all home loans, as well as most other financial products. At RateCity.com.au, you can use expert comparative data from CANSTAR CANNEX, Australia’s leading financial research and ratings firm. CANSTAR CANNEX has independently analysed and evaluated hundreds of financial products to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
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