Any Australian with a mortgage will know it’s been almost three years since we saw a change in the Reserve Bank of Australia’s cash rate.
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In the last few years, we’ve seen lenders move home loan interest rates out-of-cycle, often increasing rates and putting greater pressure on Aussie families.
However, today’s decision has been tipped by experts to finally bring some relief in the form of a rate cut. In fact, many have speculated there may be a second rate cut later in the year.
In light of this, some lenders are choosing to get ahead of the game in an effort to bring in new business. Several lenders have already taken the plunge in cutting rates ahead of today’s meeting, setting a standard that should help thousands of Aussie families get their heads above water.
In other words, you don’t have to wait for RBA’s ass to announce a cut, because there are already some great deals getting around out there right now.
RateCity.com.au research has found that in the last two months, over 50 lenders have already cut their fixed rates. Most recently NAB, Bank of Queensland, Virgin and Greater Bank have cut fixed rates, with Greater Bank leading the charge in dropping rates under 3 per cent.
Some lenders have also already begun cutting their variable home loan rates, including Macquarie Bank, Mortgage House and ING.
If the RBA does announce a rate cut today, the big question will be whether lenders will pass on the full 0.25 per cent cut to borrowers, or pocket some themselves.
For example, if you currently have a $500,000, 30-year loan at an average rate of 4.30 per cent*, you would currently be making monthly repayments of $2,495.
If the RBA cut happens today and your lender chose to pass on the full interest rate cut of 0.25 per cent, dropping your rate to 4.05 per cent, your new monthly repayments would become $2,423 – a monthly saving of $73 or $876 a year.
This could mean a free tank of petrol a month for Aussie households or help to pay for groceries.
If your lender isn’t prepared to pass on the full rate cut, you can do it yourself by refinancing to a more competitive rate. Refinancing may help you to reduce monthly repayments, free up some equity to renovate or increase loan flexibility and features.
Keep in mind that there are costs associated with refinancing – such as discharge fees – but it’s important to compare these to your potential savings over the life of your loan. Work out how much you may save in a year by refinancing, and how long it may take for these savings to pay for your switching costs.
With so many lenders already slashing rates ahead of today’s RBA decision, it may be worth considering whether refinancing to a lower rate lender is a competitive option for your financial needs and budget.
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*Figures based on variable, owner-occupier loan paying principal and interest, includes ongoing annual fee of $253. 4.30 per cent interest rate is average variable owner-occupier rate on RateCity.com.au database.
