‘Create their own rate cut’: Kochie urges borrowers to consider breaking up with their bank
Homeowners struggling after missing out on a rate cut from the Reserve Bank today have been urged to “create their own rate cut”.
Homeowners struggling after missing out on a rate cut from the Reserve Bank have been urged to “create their own rate cut” by dumping current lenders for a better deal.
As shock new research reveals nearly one in five Australians don’t even know their interest rate, it’s emerged that almost half of all homeowners have been with the same lender for more than half a decade despite better deals being available.
In some cases, they are missing out on thousands of dollars of savings that could help them pay off their loan faster or even put away some cash for a holiday.
By switching from a big lender like the ANZ to HSBC, approved borrowers can slash monthly minimum payments on a loan by $397 a month for a $500,000 loan.
Over a year, that adds up to $4,764, which could be ploughed back into the loan to pay it off faster, put aside for bills and expenses or even used for a holiday.
Someone with a $750,000 mortgage could save $595 a month in repayments by switching to a better deal or a stunning $7,140 yearly.
Compare the Market Economic Director and former Sunrise host David Koch said savvy refinancers could create their own rate cut, suggesting a person with an owner-occupier $750,000 loan could save $595 a month by switching from a rate of 7.24 per cent to 6.04 per cent
Despite the fact the RBA left official rates on hold, Mr Koch said that some of the country’s biggest lenders had reduced their home loan rates over the past month, continuing a trend of cuts across the mortgage market.
Commonwealth Bank of Australia (CBA) lowered rates on fixed and variable mortgages by up to 0.70 per cent.
The bank’s three-year fixed rate dropped from 6.59 per cent to 5.89 per cent.
However, Mr Koch warned borrowers against locking in a rate now, given that the RBA is tipped to reduce the cash rate later in the year.
“While these fixed rates south of 6 per cent may seem tempting, if you can afford to hedge your bets, it may be worth waiting for a RBA cash rate cut,” Mr Koch said.
“Fixed home loans are great for shielding you from rate rises, but they will block you from taking advantage of a rate cut.
“Banks won’t reduce their fixed rates unless they think it’s a safe bet for them. The reality is rates could be a lot lower in four years’ time.
“History tells us it’s usually better to remain a bit flexible and consider staying on a variable rate when we’re at the peak of the cycle and rates are widely tipped to go down.
“Even though there wasn’t a cash rate cut today, seeing these fixed rates drop is a really good sign and an indicator one could be coming soon.”
Treasurer Jim Chalmers announced plans earlier this year to streamline the rules and slash red tape for customers wanting to switch banks.
While hundreds of thousands of homeowners could save money if they switched lenders, banking experts concede most don’t make the switch, fearing the paperwork required.
However, under new changes unveiled by the Treasurer, the government promises to make it easier for customers to switch loans amid the cost of living crisis.
“The changes will help bank customers get a better deal, including through more choice, lower prices and better services,” Dr Chalmers said.
“With the cash rate at the highest level in over a decade, it’s extremely important to shop around to minimise the interest on your repayments as much as possible,” Mr Koch said.
“There’s a dwindling number of lenders still offering $2000 cashback for refinancers too.
“Some of the lenders that are still offering $2000 or more in cashback include ME bank, Reduce Home Loans, Greater Bank, Newcastle Permanent and ANZ.
“ME Bank is even offering a $3,000 cashback and their lowest advertised rate is 6.13 per cent.
“But be careful not to fall into a honey trap. Make sure the cashback deal is attached to a low rate, otherwise it may not be worth it.”
Compare the Market is also offering a $2000 bonus for new homebuyers and refinancers who apply and settle a loan before 31 December 2024.
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