Banks have been falling over themselves to cut interest rates ahead of Tuesday’s much-anticipated meeting of the Reserve Bank of Australia.
The Reserve Bank board has announced it will lower the official cash rate from 1.50% to a new record low of 1.25%.
A raft of lenders are now expected to follow with rate cuts of their own; some will pass on the full 0.25 percentage points, while others may cut by less.
However, many lenders have preempted today’s decision by cutting variable rates over the past month. For example:
- Mortgage House unveiled a variable rate of just 3.29 per cent
- ING reduced its owner-occupied variable rates by 0.17 percentage points
- Macquarie Bank slashed its variable rates by up to 0.51 percentage points
Fixed rates have fallen to as low as 2.99%
Meanwhile, in response to falling funding costs, a raft of lenders have also responded with reductions in their fixed rates. More than 50 lenders have cut their fixed rates in the past two months, according to research from RateCity.com.au, including:
- Greater Bank slashed its one-year fixed-rate loan to just 2.99 per cent
- NAB reduced some of its fixed rates by 0.20 percentage points
- Bank of Queensland made cuts of up to 0.31 percentage points
A lot of money is riding on the RBA’s decision
If the Reserve Bank cuts rates on Tuesday, and your home loan lender follows suit, you could save thousands of dollars over the life of your loan.
Let’s assume you have 25 years left on your mortgage, you still owe $400,000 and your current interest rate is 4.30 per cent (which is the average variable owner-occupier rate on the RateCity.com.au database). Here’s how a drop to 4.05 per cent might improve your financial position:
|Monthly repayments||Annual repayments||Total repayments|
* Figures based on variable loan paying principal and interest. Does not include fees.
There are more than 100 mortgage lenders in Australia, so you’re in a strong position if the Reserve Bank cuts rates today and your lender doesn’t pass on the full cut.
In that case, shop around, because there’s a good chance you’ll find a lender offering a comparable home loan at a lower interest rate. Many lenders are also offering cashback incentives to refinancers.
Compare home loan interest rates
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