How to work out if home loan customers are being ripped off
The Reserve Bank of Australia is expected to keep the cash rate on hold in September but borrowers shouldn’t rest easy. There is a simple way to work out if you’re being charged too much.
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Borrowers should be checking to see what deals their lender is offering new customers to make sure they are not getting ripped off.
The Reserve Bank of Australia board meets on Tuesday and it is expected governor Philip Lowe will keep the cash rate on hold at 1 per cent.
But deals continue to tumble — analysis by financial comparison website RateCity found dozens of lenders have cut variable home loan rates on both owner occupier and investor products in the past month.
Some owner occupier principal and interest deals are even as low as 2.89 per cent.
Aussie Home Loans’ chairman John Symond said there was a strong chance the cash rate could fall for the third time this year which should deliver even cheaper deals for customers.
“Our research shows the majority of people are negative about the home loan process and some are even putting off buying a home because of it,” he said.
“Conditions in the market suggest now might be the right time to check out the special deals and low rate offers now available.”
Continuing global economic problems have contributed to eroding confidence in the Australian economy and limited the potential impact of cutting the cash rate this month.
RateCity’s spokeswoman Sally Tindall said existing borrowers should pay close attention to what new customers with the same financial institution were being offered.
“Homeowners should not sit on their hands because the lower your interest rate and fees the more likely you’ll have money left over in your pocket,” she said.
“See what other banks are offering on similar products and check what your bank is offering to new customers.
“What we’re seeing at the moment is banks big and small are continuing to cut rates for new customers in order to entice them onto their books.”
Mr Symond said for borrowers who do work out they are paying a rate that is too high, they should consider refinancing.
“But keep your payments at the current level as the extra repayments could cut thousands of dollars and years off your mortgage”, he said.
LOWEST OWNER OCCUPIER RATES
1. Reduce Home Loans, Low Rider Home Loan, 2.89 per cent.
2. Mortgage House, Blue Loan Prime, 2.89 per cent.
3. Well Home Loans, Well Balanced Home Loan, 2.97 per cent.
LOWEST INVESTOR RATES
1. Reduce Home Loans, Rate Slasher Variable Investment Loan, 3.19 per cent.
2. Well Home Loans, Well Balanced Investment Loan, 3.27 per cent.
3. Freedom Lend, Freedom Variable Investment Loan, 3.34 per cent.
Source: Ratecity.com.au on principal and interest loans.
Originally published as How to work out if home loan customers are being ripped off
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