Maintain Payments To Make Savings

Posted on 15/07/2019  
Maintain Payments To Make Savings

Homeowners will make the biggest savings from the Reserve Bank's official interest rate reductions by maintaining their current mortgage repayments at the pre-cut levels.

Mortgage broker Louise Lucas of The Property Education Company says borrowers should maintain the higher repayment levels and get ahead of their mortgage payments.

Following the interest rate reductions in June and July, most variable rate home mortgage holders are set to save more than $100 a month, says Sally Tindall, research director at comparison site RateCity.

“For many, it’s money they can spend paying off the winter electricity bills, buying groceries or on extra mortgage repayments,” she says.

But for those looking to make the most out of the recent cuts, it's an ideal time to pay down your loan faster to get ahead.

Steve Mickenbecker, group executive of financial services at comparison site Canstar, says the average variable-rate interest mortgage listed on the Canstar database of 4.13% will have monthly repayments of $1,979 over 30 years, Mickenbecker says. Before the two interest rate cuts, the typical rate was 4.3%.

Anyone who maintains their current repayments at that higher level would save more $13,383 in interest over the life of the loan, and pay off their loan 14 months sooner, the Canstar figures show.

Figures from the comparison site Finder.com show the lowest variable-rate listed following the July rate cut is Reduce Home Loans, at 2.89%.

ANZ and the Commonwealth Bank now have a standard variable rate of 4.93%, Westpac 4.98% and NAB 4.92%, although the banks do offer discounted variable rates which are much more competitive than their standard variable rates.

NAB’s and the Commonwealth Bank’s lowest variable rate is 3.35%; ANZ’s is 3.38% and Westpac is 3.58%.

Graham Cooke, insights manager at Finder, says: “If your rate doesn’t have a '3' in front of it, call your bank and ask for a better deal.

“You have an especially strong case if you have kept up with your repayments and have a good credit score. Often, banks will be willing to do something to keep you as a customer. If not, refinancing is easy, so shop around.”

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