Interest rate cut this week to a record low of 1 per cent.
Homeowners who stand to make the biggest savings as a result of the Reserve Bank of Australia’s official interest rate cut this week to a record low of 1 per cent are those who maintain their current mortgage repayments at the pre-cut interest rate.
Following the previous rate cut in June and the one on Tuesday, the majority of 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, says Steve Mickenbecker, group executive of financial services at comparison site Canstar.
The average variable-rate interest mortgage listed on the Canstar database of 4.13 per cent will have monthly repayments of $1,979 on a $700,000 mortgage over 30 years, assuming a loan-to-valuation of 80 per cent, Mr Mickenbecker says. Before the two interest rate cuts, the typical rate was 4.3 per cent.
Anyone who maintains their current repayments at that interest rate 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 Tuesday’s cut is Reduce Home Loans, at 2.89 per cent.
ANZ and the Commonwealth Bank now have a standard variable rate of 4.93 per cent, Westpac 4.98 per cent and NAB 4.92 per cent, although the banks do offer discounted rates.
Their discounted variable rates are much more competitive than their standard variable rates.
NAB’s and the Commonwealth Bank’s lowest variable rate is 3.35 per cent; ANZ’s lowest variable rate is 3.38 per cent and 3.58 per cent for Westpac.
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,” he says.
“Often, banks will be willing to do something to keep you as a customer. If not, refinancing is easy, so shop around,” he says.