Borrowers $600 better off over the course of 2013

2nd of October 2013 | by Laine Gordon

The Reserve Bank of Australia has decided, as expected, to leave the cash rate on hold at 2.50 percent this month, following its October board meeting in Sydney today.

The decision to hold keeps the cash rate at records lows, according to Australia’s leading financial comparison website, RateCity (www.ratecity.com.au). It also means that the current low interest rates also on offer are likely to remain in place.

Alex Parsons, CEO of RateCity.com.au said despite no movement to the cash rate today, variable borrowers with a typical $300,000 home loan would be around $600 better off by the end of the year based on the previous two rate cuts in May and August 2013.

“Since January we’ve seen the cash rate slashed by 0.50 percentage points, with rate cuts handed down in May and August representing big saving for some variable borrowers,” he said.

“Compared with this time last year, variable borrowers are now paying $171 less per month on average to service the same $300,000 home loan.”

While these savings are great news for borrowers, many Australians could be even better off by refinancing into some of the lowest rates, RateCity calculations show.

“Switching from the average basic variable rate to one of the lowest advertised variable rates could free up almost $1000 over the first year, assuming rates remain steady.

“If your home loan rate starts with a 5 then you’re wasting money. Consider switching today – there are 26 variable home loans with rates below the average rate of 5.2 percent, starting from just 4.74 percent. Fixed rates are starting at 4.29 percent for a one year fixed term.”

As for savers, Parsons said the RBA’s decision to keep rates on hold would continue the poor returns savers are realising today. He urged savers to shop around and compare rates.

“While many savings accounts offer rates around the 3 percent mark, it is possible to find high interest savers paying a maximum rate of up to 4.77 percent, so it’s vital that savers shop around to ensure they are maximising their profit margin.”

This is an information service. By browsing on the website and/or using our search tools, you are asking RateCity to provide you with information about products from multiple financial institutions. We will try to show you a range of products in response to your request for information. The search results do not include all providers and may not compare all features relevant to you, for further details refer to our FSCG. The rating shown is only one factor to take into account when considering these products. We are not a credit provider, and in giving you product information we are not making any suggestion or recommendation to you about a particular credit product. If you decide to apply for a product, you will deal directly with a financial institution, and not with RateCity. Rates and product information should be confirmed with the relevant financial institution, and you should review the PDS before you decide to purchase. See our terms of use for further details. This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.