They say bad things come in threes, but not this time. The RBA has held the cash rate for a third consecutive month – marking Phillip Lowes’s final move as the central bank governor.
Compare the Market’s Economic Director, David Koch, said that while the relief was welcome, overleveraged borrowers would suffer if high rates lingered.
“While we might have reached a peak, we’re a far cry away from the ultra-low rates Dr Lowe had forecast until 2024,” Mr Koch said.
“It’s unlikely we will ever get back to the record low rates we had during the pandemic. Those days are probably gone.
“Unfortunately, that means a lot of borrowers – particularly young people – will struggle to make their repayments.”
However, Mr Koch said there were positive signs that action on rates had been effective in curbing inflation.
“We saw CPI fall to 4.9% in July, down from 5.4% in June,” Mr Koch said.
“In such tight conditions, people are hiding their wallets, and reining in spending wherever they can. We are finally starting to see that behaviour is having an effect on overall prices.”
Australians with a $750,000 mortgage on a variable rate could already be paying $1,814 more each month than they were at the start of May 2022.
|Mortgage size||Increase in average monthly repayments since the start of May 2022 (4% jump)|
|Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 2.86% p.a in May 2022; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees.|
Mr Koch encouraged cash-strapped borrowers to look for ways to save, with the first being securing a lower rate.
“Do some research, compare different loans, and see what you could be saving,” Mr Koch said. “Depending on your circumstances, the difference could save you thousands over the life of your loan.
“Once you’re armed with some information, phone your lender and see if they can offer a discount. If the answer is ‘no’ be prepared to walk.”
Compare the Market analysis shows the difference between some of the advertised rates was 0.79%.
A person with an owner-occupier $750,000 loan could save $383 a month when they switch from a rate of 6.49% to 5.70%.
|Mortgage size||The difference between variable rates in the market|
|Minimum monthly repayments on variable P&I rate of 5.70%||Minimum monthly repayments on variable P&I rate of 6.49%||Difference in monthly minimum repayments|
|Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 5.69% compared to 6.344% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees.|
With insurances and energy prices still on the rise, Mr Koch said these were important targets for families searching for savings.
“Digging into the CPI figures and you’ll find the major culprits,” Mr Koch said.
“Electricity is up 15.7%, gas is up 13.9% and insurance and financial services are up 8.5%. These are the bills you need to put on your budgeting hit list.
“The best part is, these are some of the easiest expenses to compare and switch and we know the savings can be big.”
For more information, please contact:
Natasha Innes | 0416 705 514 | [email protected]
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