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Cash rate holds: variable borrowers $625 better off in 2014

Reserve Bank leaves interest rates on hold in December

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.

It is one year and four months since the last rate cut (0.25 percentage points in August 2013) and more than four years since the last rate increase.

Peter Arnold, product director of RateCity.com.au, said that despite no move to the cash rate again today, many variable borrowers are paying less and less each month to service the same home loan.

“Since the last RBA cut of 0.25 percentage points we’ve seen the average variable rate decrease by 0.35 percentage points – that’s over and above what the RBA has passed on as a range of lenders move independently of the central bank,” he said.

“For a typical borrower of $300,000 that 0.35 percentage points ends up being $62 a month saving. 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.

“Over the course of 2014 alone, a typical borrower with a variable home loan is $625 better off as a result of out-of-cycle rate cuts,” he said.

The first Tuesday of the month has become an ‘event’ as consumers wait for the RBA’s call on rates. But what a lot of people don’t realise is that rates are constantly on the move throughout the year, Arnold added.

“We’ve seen a range of lenders compete very aggressively for market share and in the last four months we’ve seen over 70 percent of lenders move their rates,” Arnold said.

“If you’re a borrower out there with a mortgage, don’t just wait for the RBA to move. The banks are cutting independently and there’s a lot of great deals on the market.

“If your home loan rate doesn’t start with a ‘4’, now is the time to jump online, compare rates, then ask your lender for a better deal and be ready to refinance to a new lender if required,” he said.

RateCity shows advertised variable rates from 4.39 percent and fixed rates from 3.75 percent for a 1 year honeymoon deal and 4.49 percent for 3 years.

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