Few people were betting on a rate cut today, but the news was no less disappointing for the 3.3 million Australians with a mortgage, according to Compare the Market’s Economic Director David Koch.
Someone with an average loan of $678,000 could have seen their monthly repayments reduced by about $107 if the Reserve Bank delivered a 0.25% cut at today’s meeting.
And while there is still a chance the RBA could drop rates in December, Mr Koch said that was highly unlikely based on last month’s CPI numbers.
“The Reserve Bank doesn’t want the horse to bolt on inflation, and they have been spooked by the latest figures that show household costs for things like food and electricity on the rise in a really big way,” Mr Koch said.
“I don’t think we’ll see a rate cut for at least six months. I think the RBA will want to see CPI data from February before they make another move on rates because they really need to be convinced that inflation isn’t getting out of control.”
Mr Koch reminded homeowners not to rely on the Reserve Bank to deliver relief.
“If you are on top of your repayments, have a good credit score and a decent loan to value ratio, you’re likely in a pretty good position to negotiate a rate cut of your own,” Mr Koch said.
“It’s still a super competitive home loan market and there are great deals for people who are willing to do a bit of leg work or ask a broker to do it for you.
“And right now, I think a lot of homeowners should be asking themselves – ‘should I look at a fixed rate?’.
“Fixed rates can be a bit iffy when rates are cycling downwards. But if you are like me, and you don’t believe rates are going to move fast any time soon, then you might be able to start saving now.
“Some of the cheapest rates available are around 4.89% for two-years fixed. With the average variable rate sitting around 5.50% that’s a reasonable discount – equivalent to more than two standard RBA cuts of 0.25%.
“But keep an eye on the comparison rate of those fixed rate offers, the advertised rate might seem attractive but it’s the comparison rate that you’ve got to keep a close eye on as that includes any fees.”
| Loan size | Impact of a 0.25% rate cut | Impact of x2 0.25% (0.50%) | Impact of x3 0.25% rate cuts (0.75%) | Impact of x4 0.25% rate cuts (1%) |
| $500,000 | $81 | $161 | $256 | $318 |
| $600,000 | $97 | $193 | $307 | $382 |
| $750,000 | $122 | $242 | $384 | $478 |
| $900,000 | $146 | $290 | $461 | $573 |
| $1,000,000 | $162 | $322 | $512 | $637 |
| *Calculations assume an owner-occupied loan with a variable interest rate of 6.3% that is reduced to 5.3% after four 0.25% rate cuts passed on in full by the bank. It assumes a 30-year loan term, with no ongoing fees. This does not take into account the reduction of the loan balance over time. | ||||
For more information, please contact:
Phillip Portman | 0437 384 471 | [email protected]
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