Stagnant cash rate presents benefits to home loan borrowers

The move to keep the official cash rate at 1.5% demonstrates the RBA didn’t fall victim to the latest inflation data that shows zero growth in the March quarter and slow consumer spending, according to Canstar finance expert Steve Mickenbecker.

“The RBA is waiting to see the impact of lower than expected inflation, lacklustre GDP growth, falling property prices and any shock waves from the election outcome before making any moves,” Mickenbecker said.

“A rate cut would be a game charger for many homeowners wanting to get ahead in repayments and those looking to get into the market now.”

While the Reserve Bank hasn’t moved rates in nearly three years, banks have been reducing interest rates for new lending with lower fixed rates and special offers. Canstar’s rate tracking report revealed that 75 lenders have made out-of-cycle rate moves this year, with 53% of them reducing their fixed interest rate by -0.26% on average.

Don’t wait

RateCity research director Sally Tindall added that the possibility of Australians getting a rate cut is “still not off the cards”. Although borrowers might have to wait until August to get a rate cut.

“Based on today’s statement from Phillip Lowe, its likely they’ll hold off until they see more consistent trends in employment and inflation,” Tindall said.

“But consumers don’t have to wait for the RBA to save money on their home loan. The downturn in the market is putting pressure on banks’ bottom lines. What they need is more business on their books.”

According to Tindall, the best way for borrowers to get a rate cut is to shift from being an existing customer to a new one. When customers go online, they should find out what their bank and others are offering to new customers.

“Ultimately the lower the rate, the more money you’ll have left in your pocket,” she said.

“Call your bank and ask them to match the rate offered to new customers, and if they aren’t prepared to budge you are well within your right to take your business to another lender; that’s the beauty of a variable home loan rate.”

Not on rate alone

Finder insights manager Graham Cooke also believes a rate cut is imminent, and consumers need not wait for the cash rate to fall to cash in.

“Whether the cash rate is at 1.5% or 1.25%, it’s still as low as we’ve seen in our history and home loan rates are equally at historic lows,” Cooke said in another statement.

Currently, the average home loan amount is $384,700, while the average variable rate is at 4.91%. Reducing the rate with 25 basis points could lead to a savings of almost $700 annually.

“Don’t settle – the potential savings are huge. Whether you try to negotiate a better rate with your current lender, or switch to save, it’s certainly worth the effort,” Cooke said.

“But remember, don’t make a decision based on rate alone – always factor in the home loan’s features and whether these fit with your goals and lifestyle so you’re not stung down the track.”

From MPA Magazine

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