Five sure home loan bets as RBA keeps interest rates on hold
ANALYSIS: AS the RBA left interest rates on hold on Melbourne Cup day, there are five things that are a sure bet when it comes to home loans.
BACKING the Melbourne Cup winner today is hard enough but when it comes to your home loan there’s a few things that are a sure bet.
The Reserve Bank of Australia board met today for the second-last time this year and new Governor Philip Lowe unsurprisingly decided to keep the cash rate on hold at 1.5 per cent.
But when punting on Melbourne Cup Day you can be rewarded with great returns if you back a roughie paying better odds, but gambling on your home loan can be a whole different ball game.
Here’s five things that are sure to leave you with some extra cash in your pocket.
1. Backing a winner
Picking the best home loan provider can be a gamble but in order to back a winner you need to know your form guide inside out.
Understand the rates, fees and charges associated with your loan and be don’t just pick a lender because you like the brand, be prepared to go with a lender who has good form and can deliver you a strong result on your home loan.
At the end of the day choose a lender using your head not your heart.
2. The next race
Financial experts are predicting the next rate cut — if there is one — will be a long way off.
HSBC chief economist Paul Bloxham this week predicted the RBA board won’t be budging on the cash rate at all in 2017.
So this means you may have to wait until the following year to see any more reductions to the cash rate.
3. Getting a good return
While interest rates are low there’s one thing that’s certain — pay extra now to reduce your principal and in turn bring down your monthly interest charges.
Data from financial comparison website iSelect shows on a $300,000 30-year home loan the average variable rate is 5.25 per cent and the monthly repayments are $1656.
While there are many deals a lot lower than this, on this rate by paying an extra $20 a week a customers can save nearly $38,000 in interest charges and cut three years and three months off the life of their loan.
4. Late scratchings
Just like a horse, if your lender fails to even make the starting line in the competition stakes then it’s no good putting your money on them.
Be sure to take your home loan elsewhere and score yourself a much better deal.
Using financial comparison websites to find the best lender possible.
5. Poor form on fixed rates
There are many fixed and variable rate deals below the four per cent so for most borrowers — at least with a loan-to-value ratio of 80 per cent (20 per cent deposit or equity) — they’ll be able to score one of these deals.
But once the fixed periods ends this is where you will get caught out, so the key thing is to read up on your home loan form and work out what deals are available before the horse bolts and you end up paying too much in interest.
Originally published as Five sure home loan bets as RBA keeps interest rates on hold