Rate cuts offer borrowers rare opportunity to save
Leading consumer information provider InfoChoice.com.au points out today's interest rate cut by the Reserve Bank offers home loans borrowers the best chance in years to get the mortgage monkey off their backs.
For home loan borrowers, 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.
Chris Gosselin, Chief Executive of InfoChoice, said: “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.
“Those who resist the temptation to enjoy more money in their pockets each month will be far better off in the long run.”
Standard variable rates are already falling to around 6.8 per cent in response. At this level over the life of a 25-year loan borrowers maintaining their old repayments levels would save $42,000 in total interest payments and pay their loan off five-and-a-half years earlier.
“Every extra dollar repaid at the start of the loan saves up to two dollars in interest by the end of the loan,” Mr Gosselin said.
At the very least, the low interest rate climate over the next couple of years offers borrowers the chance to get ahead on home loan repayments and create some breathing space should rates later return to high levels.
InfoChoice's recent online survey at its BankChoice.com.au website revealed that 79 per cent of borrowers intended to make the most of interest rate reductions in this way.
InfoChoice.com.au is a leading online ‘infomediary' providing independent comparisons for consumers on banking, telecommunications, investments, domestic airfares and insurance.
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