Today’s rate cut decision will deliver a “well-deserved boost” to Aussie homeowners who have carried the country over the inflation busting threshold according to Compare the Market’s Economic Director David Koch.
The 0.25% reduction will translate to $106 in monthly repayment savings – more than $1200 a year – for borrowers with an average loan of $666,000, assuming banks pass on the discount.
Mr Koch said it was time for homeowners to be rewarded for bearing the brunt of the Reserve Bank’s war on inflation.
“For years, the Reserve Bank has been lecturing us saying ‘we got to get inflation under control, we’ve all got to do our bit, we’ve got to tighten our belts, we’ve got to cut back household spending’,” Mr Koch said.
“That’s what we have done, now the inflation target is down within the Reserve Bank’s 2 to 3% target range. We absolutely should be rewarded for doing the right thing.
“Today’s rate decision will make a huge difference for families struggling under the weight of higher repayments. We know the average borrower has been spending roughly $18,000 more each year on their home loan since rates reached their peak.
“That’s a heavy burden when the cost of everything else from insurances to council rates and energy bills are also causing a lot of pain.”
Impact of potential rate cuts on a home loan
| Loan size | Difference in monthly repayments 0.25% rate cut | Difference in monthly repayments 0.50% rate cut | Difference in monthly repayments 0.75% rate cut | Difference in monthly repayments 1.00% rate cut |
| $500,000 | $80 | $159 | $237 | $314 |
| $600,000 | $96 | $191 | $284 | $376 |
| $750,000 | $120 | $238 | $355 | $470 |
| $900,000 | $144 | $286 | $426 | $565 |
| $1,000,000 | $160 | $318 | $473 | $627 |
| *Calculations assume an owner-occupied loan with a variable interest rate of 6%, 30 year loan term, with no ongoing fees. Monthly repayment calculations assume the lender has passed on the rate cut in full and do not take into account the reduction of the loan balance over time. | ||||
While most banks are expected to pass on the rate cut in full, Mr Koch warned that homeowners shouldn’t misplace their confidence in lenders.
“Rates may be starting to drop but that doesn’t guarantee you’re getting a good deal, especially if you haven’t refinanced in a few years,” Mr Koch said.
“If you’ve paid down your loan, and your property has increased in value, chances are you’ve improved your position to negotiate even better rates.
“Remember – if you have a good track record, a solid credit rating, and consistently make repayments, the banks want your business.
“It only takes a few minutes to run a quick comparison and look for a better rate. When switching could save you thousands over the life of your loan, you really can’t afford not to check.”
For more information, please contact:
Henry Man | 0474 368 908 | [email protected]
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