Home loan borrowers warned not to get ripped off as interest rates plummet
WITH the Reserve Bank cash rate tipped to fall even further in coming months, experts detail how home loan borrowers should ensure they aren’t ripped off.
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BORROWERS should have a “3” in front of their home loan interest rate otherwise they are getting ripped off, experts say.
The latest cash rate fall to a record low of 1.75 per cent this month has seen both variable and three-year fixed rate deals on owner occupier loans plummet below the four per cent mark.
The lowest variable rate on the market according to financial comparison website RateCity is Homestar Finance with a rate of just 3.61 per cent, while some fixed rate deals are as low as 3.99 per cent.
The site’s spokeswoman Sally Tindall said borrowers should be maximising these ridiculously cheap deals while they last and expects offers to become even cheaper with possibly two more rate cuts this year.
“The writing is already on the wall for another rate cut by August, with a third now also on the cards,’’ she said.
“This would take Australia’s cash rate to a record 1.25 per cent — a figure few would have predicted, even a month ago.
“If these cuts transpire, we’re likely to see rock-bottom home loan interest rates of under 3.5 per cent, while rates under 4 per cent will become the new norm.”
St George chief economist Hans Kunnen is forecasting another 25 basis point cash rate fall to 1.5 per cent in August which would be likely to result in more record-breaking deals flooding onto the market in the coming months.
The Reserve Bank slashed its forecast on inflation which is expected to stay as low as 1.5 per cent throughout this year and not rise until 2018.
RateCity’s database shows on a $300,000 30-year home loan the average variable rate is 4.64 per cent and the monthly repayments are $1545.
On a three-year fixed rate the average rate is 4.38 per cent and the monthly repayments are $1369.
Loans.com.au is also one of the cheapest lenders on the market offering a variable rate loan deal at just 3.63 per cent and managing director Marie Mortimer says there’s plenty more hot deals available.
“Typically a customer with over 20 per cent deposit or equity looking for a loan to buy or refinance their primary residence will get the most attractive rate available,’’ she said.
“This rate should be well under four per cent.”
Yellow Brick Road executive chairman Mark Bouris said for borrowers who are torn on whether to fix they have a few options.
“Either do a mix of fixed and variable — the split is based on how you feel about whether the market has bottomed or not — or stick with variable,’’ he said.
sophie.elsworth@news.com.au
Originally published as Home loan borrowers warned not to get ripped off as interest rates plummet
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