The Reserve Bank of Australia has passed up the final opportunity of the year to move the cash rate, leaving rates steady at 2.5 percent at today’s board meeting.
Laine Lister spoke with RateCity’s product director, Peter Arnold, about what that means for home owners and consumers coming into Christmas.
Since the last RBA cut of 25 basis points we’ve seen the average variable rate decrease by 35 basis points, so that’s over and above what the RBA’s passed on. We’ve seen a range of banks and lenders move independently of the RBA.
For a typical borrower of $300,000, that 35 basis points ends up being $62 a month. If you’re in some of the capital cities like Sydney and Melbourne – or if you’ve borrowed more – those numbers can easily be double.
If you’re a borrower out there with a mortgage, don’t just wait for the RBA to move. The banks are cutting independently there’s a lot of great deals on the market.
We’ve seen a range of lenders compete very aggressively for market share. We’re seeing a lot of rates under 5 percent – there’s variable rates from 4.39%, there’s fixed rates from not much more.
If your home loan rate doesn’t start with a 4, now is the time to jump online, compare rates and then ask your lender for a better deal and be ready to refinance to a new lender if required.
We often get asked, what should people do with these low rates. It’s not an opportunity to borrow up more and increase your debt. It’s a great opportunity to pay down your home loan. That $62 per month can be really tempting to spend elsewhere – particularly in the lead up to Christmas, but if you’ve got the dedication to put that back into your home loan over the life of the loan you could be saving around $20,000 which is great bang for your buck.
The major banks are offering on average 5.09 as their lowest variable rates. Even if you’re on these hot rates from the majors, switching to the lowest rates on the market of 4.39% is going to save you around $100 a month – that’s a big saving that will pay for any of the associated switching costs and your time and effort quite quickly.