With the Reserve Bank of Australia having recently made the decision to keep the nation’s official cash rate at 1%, home loan borrowers should start reviewing their current deal now if they don’t want to miss getting a better one.
“My advice to borrowers who have been in the same home loan product for a while is: don’t wait to be offered a better deal on your home loan by your lender, because it won’t happen,” Mortgage Choice chief executive officer Susan Mitchell said in a statement.
“The RBA may have held the cash rate this month, but we have seen a 50-basis point cut to the cash rate since June, which has made the interest rate environment extremely competitive. Lenders are fiercely competing for new customers, which puts borrowers in a great bargaining position if they are prepared to switch lenders.”
In a separate statement, Canstar finance expert Steve Mickenbecker said with lenders cutting rates for new lending 686 times in August alone, borrowers “may need to be prepared to switch lenders to be eligible for these historically low rates.” And spring, he added, is the time to “clean out” one’s finances and get one’s “home loan in shape.”
According to Mickenbecker, a recent Canstar survey revealed that 36% of more than 1,100 home loan borrowers didn’t know their loan’s interest rate. “You should know your current interest rate, should be prepared to compare and switch if need be in search of a better offer,” he said.
“Switching from the average variable rate of 4.03% to the lowest in the market could mean an interest saving of over $91,000 over the life of a $400,000 loan. If you think you’re paying too much talk to your bank and look at the alternatives.”
Best foot forward
Outlook for the domestic economy may result to further rate cuts in the near future, but whatever the RBA decides to do next, the “current market offers great opportunities” for Australians looking to purchase their first property or to refinance their home and families considering a home upgrade, according to Mitchell.
“With home loan interest rates at levels not seen since the 1950s and dwelling values finding a floor in some capital cities, those who wish to get their foot on the property ladder should speak to their local mortgage broker to put their best foot forward when preparing and submitting a home loan application,” she said.
“While housing market conditions are more attractive than they have been in recent times, it’s important to remember that the home loan application process is still as complex as ever and calling on an experienced mortgage broker for guidance through the process will give borrowers the peace of mind that their application is on the right track.”