Borrowers urged to check what interest rates they are paying on their deals
The record-low interest rate environment should prompt customers to check exactly what rates they are being charged.
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Australians have less than $500 in cash savings as panic buying hits
MANY Australians remain clueless about the interest rates they are paying on their debts and could be paying too much.
The Reserve Bank of Australia’s decision to slash the cash rate to 0.5 per cent this month resulted in many banks – including the big four – passing on the full 0.25 percentage point drop to mortgage customers.
Despite this, personal loan and credit card rates still remain relatively high and are often in the double-digit range.
A YouGov Galaxy poll commissioned by MoneysaverHQ in partnership with SocietyOne quizzed 1000 Australians and found that, while a majority (54 per cent) are aware of the interest rates they are paying on their debts, 46 per cent have no clue.
And only 26 per cent of people knew the RBA’s official cash rate is below 1 per cent.
SocietyOne’s chief executive officer Mark Jones said Australians should know the rates they are paying on their deals to ensure they are not getting gouged.
“They should know because it’s an important part of their household budget,” he said.
“A lot of debts in the Australian economy are variable so when you take out a mortgage or a credit card the rate is true at the time but it moves over time.”
Mortgage prices have continued to fall in recent years and many fixed and variable rate deals now have a “2” in front.
While the cheapest credit card deals are as low as 7.49 per cent and personal loans vary, fixed rate unsecured loans can be down in the 7 per cent range.
Tribeca Financial’s chief executive officer Ryan Watson said it’s important to put pressure on your lender and ask for the best deal possible.
“It actually pays to know what your interest rate is and compare it regularly with other providers in the market,” he said.
“It can save you thousands of dollars.
“Another reason why it pays to know your interest rate is that a trick the banks often use over time is what I like to call ‘interest rate creep’.
“They sneakily increase your interest rate little by little and it ends up hurting your hip pocket.”
He said if you are questioning a lender about the interest rate you are paying, make sure you understand the best deals that are available.
The Mortgage and Finance Association of Australia’s chief executive officer Mike Felton said people should check the rate they were paying.
“It’s essential that customers know the actual mortgage rate they are paying as well as all fees and charges so that they can compare to what is available in the market,” he said.
“We would recommend that a customer assesses their home loan at least once annually to ensure that they are getting a competitive rate.”
BREAKOUT
Cheapest three-year fixed home loan, owner occupier, principal and interest.
ING, Orange Advantage, 2.49 per cent.
AMP, Professional Package, 2.49 per cent.
Cheapest three-year variable home loan
Reduce Home Loans, Low Rider Home Loan, 2.44 per cent.
* Based on a $300,000 30-year loan.
Cheapest low-rate credit card
Cheapest $10,000 unsecured personal loan
Symple Loans, personal loan, 5.75 per cent.
Cheapest $10,000 secured personal loan
Endeavour Mutual Bank, Term deposit secured loan, 4.45 per cent.
Source: RateCity.com.au.