Borrowers now in box seat to get ahead
The Reserve Bank is expected to announce a cut in Australian interest rates tomorrow by 0.25 percentage points to 4.50 per cent meaning standard variable home loan rates will fall to around 6.30 per cent.
Although our domestic economy is maintaining its strength and the housing market is heating up, the RBA is mindful of a looming international recession.
Whilst interest rates are at a level not seen in recent decades, borrowers are now in a position to grab their chance to get ahead on home loan repayments should rates later return to high levels.
Assuming a reduction in rates tomorrow they will have dropped 1.75 percentage points since February this year.
Although this represents a reduction in repayments of nearly $170 per month for an average $150,000 home loan, borrowers should think twice about the real savings to be had.
In keeping a focus on their long-term goals, borrowers can employ short-term strategies that will allow them to SAVE around $150 a month in interest:
- Pay your loan off quicker with fortnightly or weekly repayments
- Additional repayments
- Don't bank cash when you have a loan – Use it to pay off your loan instead.
InfoChoice CEO Chris Gosselin said Australian homebuyers have a better opportunity than ever to make a big dent in their mortgage.
“There are hundreds of different home loans on the market promising the best deals for borrowers but the cheapest home loan is always going to be the one you pay off quickest,” Mr Gosselin said.
Over the life of a 25-year loan borrowers who have maintained their old repayments levels would save $46,000 in total interest payments and pay their loan off almost seven years earlier.
However by paying weekly the amount saved increases to over $47,000.
See our Tips and Tricks or use our calculators to work out how much you can save.