If there’s ever been an optimal time to bargain-hunt a home loan, it’s right now.
Cash rates are at a historical low – with the Reserve Bank’s interest cut at the beginning of the month pressuring lenders to slash their rates by the full 0.25% – and the government is actively rolling out its stimulus ‘rescue’ package to help kickstart the economy.
In simple terms, there’s a lot of good news for new and existing mortgage holders, and a lot of dollars to redeem on the home loan front, with talk of further cuts in the second half of this year.
So what do the reductions mean?
On average, the cut to interest rates will help borrowers with variable rate home loans, but could mean less return on savings accounts.
For variable loans, a 0.25% interest cut to an average $500k loan could reduce repayments by approximately $65 per month. And while reductions don’t apply to fixed rate mortgages, fixed rates still remain largely competitive, though with the restrictions on additional repayments still applicable to most.
According to MoneyQuest Finance Specialist Craig Corbett, the RBA’s interest cut presents a great opportunity for variable mortgage holders to reduce the term of their mortgage by keeping repayments as they currently are, or making additional repayments whenever possible.
“With interest rates being at the lowest point in history, now is the time to make additional repayments if you can,” says Craig.
“They will not be this low forever. If you can make higher than minimum repayments now, it will help you when rates do rise, and they will.”
Craig also points out that some lenders are offering rebates to refinance of up to $4000 to remain competitive.
So, if you’re ready to borrow – or, if you have an existing loan – it’s vital that you measure up the market if you want your money to go further.
“If you’re looking to purchase a home or investment property, make sure you compare lenders. Your bank rates may be well above what is available from other lenders.”
If you’re after more comprehensive advice on refinancing or securing a discounted rate loan, or you wish to connect with non-bank mortgage lenders, finance brokers are a great option to help guide you through the loan process and rates offered by a variety of lenders.