Mortgage rates cut, card rates soar

By Andrew Willink
10 September 2008

Rumours of an interest rate cut were finally fulfilled early in September, with the Reserve Bank decreasing its rates by 0.25% to 7.00%. Being the first interest rate decrease since December 2001, this was seen by economists to be overdue and eagerly awaited. Following in suit, many banks have lowered their mortgage rates, much to the appreciation of home and mortgage owners. But is there a catch? Several of the banks lowering their mortgage rates also seem to be increasing rates in other places. With most people being overjoyed about the savings they are making with their newfound mortgage rate, juxtaposing credit card rate increases have been overlooked.

The major headline recently, is unquestionably the RBA rate cut. With the long awaited lowering of this rate, home and mortgage owners will soon be paying a little less for their mortgage. Since the recent cut, a large majority of banks have decreased both their fixed and variable rates, and many customers have calculated the savings that they will make with their new lowered mortgage.

There are a few banks that have, whether it be by coincidence or in reaction to the mortgage rate cuts, increased credit card rates. This rate increase has been posted, in some cases, several days before the RBA rate cut. Variable mortgage rates have been decreased by up to 0.25%, which seems like a substantial amount. However when this is put in comparison to recent credit card increases by the same banks; which have been up to 2.75%, the mortgage decrease seems almost insignificant.

So what does this mean for you? Well, whilst many will still benefit from the mortgage rate decrease, those with high credit card debt may find that they are in a worse position than before the RBA’s decrease. Similarly they may find that their credit card interest fees will cost them more than what they have saved from their mortgage, rendering this mortgage decrease non-advantageous. The main tip is to look out for increases to your credit card interest rate, and if need be shop around for a card with a lower rate.