Rate cut offers big saving opportunity

Banks and other home lenders have been quick to pass the latest official rate cut on to borrowers who now have the best chance in years to get the mortgage monkey off their backs.

Rates are coming down very quickly, and if borrowers can maintain their repayments at the levels of just two months ago they are going to save thousands in interest and pay their loan off much quicker.

The Reserve Bank cut official interest rates by 0.5 percentage points to 5 per cent at its April rate setting meeting.

Today's 0.5 percentage-point drop in mortgage rates will mean a saving of around $50 per month on the average loan of $150,000. But all up this means 1.25 percentage points off rates this year for a monthly saving of $120.

The standard variable rate will now fall to around 6.8 per cent. At this level, over the life of a 25-year loan borrowers maintaining their old repayments levels from January this year stand to save $42,000 in total interest payments and pay their loan off five-and-a-half years earlier.

Click here to see which lenders have cut rates and when the reductions take effect.

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