Interest Rate cuts and what it means to you
This month the Reserve Bank has decided to keep interest rates on hold at the historic low rate of 1.75%.
So what does this interest rate decision have on you and your finances as a homeowner?
The historic low rates are assisting struggling families with tight household budgets and shows more families taking out variable interest loans.
But a realestate.com.au survey shows one in three people don’t understand the standard variable rate – or even know how to find out what it is.
In short a variable loan means the rate changes. It can depending on a range of factors, including the RBA’s official cash rate, and other factors by your lending bank.
It always pays to know what interest rates are doing and if the banks are passing on these cuts to you. If the banks do pass on the savings, it means home buyers can lock in finance at a lower rate – meaning more money in your pocket.
Let’s take a look at some numbers and the savings you could be making, however note the savings will depend on the amount borrowed and the mortgage product you have.
- Monthly – A cut of just 0.25% makes the repayment savings on a $400,000 loan $61 a month. That’s a tank of fuel or your coffee’s every month paid for!
- Annual - Over a year with a $400,000 loan you can save $732. You could upgrade your TV or have a weekend away!
- Life of Your Loan - And over the life of your home loan, with just a 0.25% rate cut, for a $400,000 loan you can save a massive $21,960 in repayments!
In times of low interest rates we suggest looking to the long term and consider keeping your repayments at their current level so when things change, you can build up some savings when rates go up again to pay your home loan off faster.
Still feeling the stress of your mortgage? Are you wondering if your current loan is the right fit, or if you could be getting a better deal?
Contact our experts today for a free mortgage health check.