Rate cut offers best times for home buyers
Interest rates are now back to a historical low-point in recent decades and Australian homebuyers have a better opportunity than ever to make a big dent in their mortgage.
The Reserve Bank has cut official interest rates by 0.25 percentage points to 4.75 per cent. Standard variable home loan rates will fall to around 6.55 per cent as a result.
With world economic growth slowing and likely to affect Australia these low rates may be around for sometime to come.
InfoChoice CEO Chris Gosselin said: “However, Australians currently have the unique experience of very low interest rates at a time when our economy is healthy. This gives homebuyers the chance to make the most of increased repayments to reduce their loans.”
“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.
Official interest rates were last at 4.75 per cent in October 1999, before the last raising cycle which saw rates peak in the middle of last year. Rates have been cut 1.5 percentage points since then, an interest saving of $150 a month on the average $150,000 home loan.
At this level over the life of a 25-year loan borrowers maintaining their old repayments levels would save $45,000 in total interest payments and pay their loan off almost seven years earlier.
At the very least, the current low interest rate climate offers borrowers the chance to get ahead on home loan repayments and create some breathing space should rates later return to high levels.