It’s been 15 months since the Reserve Bank of Australia (RBA) changed interest rates, but now, finally, we are getting some changes.
This month’s Reserve Bank interest rate cut shows that the economy is moving into a new phase and it will have a big impact on home borrowers.
All banks have said that they will pass on these rate cut in full. Beginning, 28 February, the banks are starting to pass them on.
But what does this rate cut actually mean for your monthly mortgage repayments? Let’s break it down.
How Much Will Your Mortgage Repayments Decrease?
The 0.25 per cent reduction can lead to noticeable savings, depending on your loan amount:
- $500,000 mortgage – Expect a monthly reduction of $80.84
- $1,000,000 mortgage – Monthly repayments decrease by $161.66
- $2,000,000 mortgage – Savings of $323.33 per month
Your exact savings may vary based on how far along you are in your loan term.
What’s next?
However, there are two bigger questions on the horizon:
1. How many more rate cuts will the Reserve Bank announce in the coming months?
None of the experts are predicting massive rate drops (sorry!). But most experts see at least one more cut this year
2. Will the banks pass these cuts on in full?
A recent review of the 10 past RBA rate found Commonwealth Bank, ANZ and National Australia Bank had delivered borrowers just four of those 10 cuts in full, while Westpac fared even worse.
What to do if your bank is not passing on rate cuts in full?
The first thing you should do is call them and try to negotiate.
If your bank refuses to drop rates, then you need to talk to your broker who can advise where to take your loan. We are already seeing some very sharp under-the-table rates come through from smaller lenders – it’s the best way of keeping the Big Four honest.
About the Author
Graeme Salt is a seasoned Loan Broker at C&N Accountants Finance, helping clients navigate the complexities of home and business lending. With years of experience in the finance industry, Graeme provides tailored solutions to suit individual needs. Have questions about your loan options? Email him at graemes@originfinance.com.au or call him directly on 02 9922 5055.