It doesn’t matter if you’re naughty or nice. The Reserve Bank has denied homeowners an early Christmas present, leaving the cash rate on hold in its final decision of the year.
The cash rate has remained at 4.35% for over a year now, with many economists revising their first-cut forecasts to mid-2025.
But Compare the Market Economic Director David Koch urged borrowers not to wait for the New Year to get their finances in order.
“Give yourself an early Christmas present and find yourself a lower interest rate,” Mr Koch said. “There’s up to a 1.15% difference between advertised rates, meaning someone with a $750,000 loan could be saving $571 on their monthly repayments when they refinance from a rate of 7.24% to 6.09%.
“Assuming the cash rate doesn’t change until at least February, that’s a $1,713 saving over the course of three months.”
| Mortgage size | Monthly minimum repayments based on advertised variable rates | ||
| Minimum monthly repayments on variable P&I rate of 6.09% (HSBC) | Minimum monthly repayments on variable P&I rate of 7.24% (ANZ) | Difference in monthly minimum repayments | |
| $500,000 | $3,027 | $3,408 | $381 |
| $600,000 | $3,632 | $4,089 | $457 |
| $750,000 | $4,540 | $5,111 | $571 |
| $900,000 | $5,448 | $6,133 | $685 |
| $1,000,000 | $6,053 | $6,815 | $762 |
| Minimum monthly repayment calculations do not include any reduction in the loan balance over time. These calculations assume: An owner-occupied variable interest rate of 6.09% compared to 7.24% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees. | |||
Mr Koch said there were three steps he liked to take before attempting a negotiation with the banks.
“Before you ask for a lower rate, arm yourself with information. You should know your lender’s lowest advertised rate.
“Next shop around and see what other offers are available – you might find even cheaper rates or enticing incentives like cashbacks.
“Finally, use a calculator to work out what you could be saving – knowing the money you could be clawing back is great motivation.
“You should feel empowered to negotiate. The worst thing that can happen is that your bank will tell you ‘no’ and then you’re free to move on to a different lender.”
Refinancing can potentially save you thousands of dollars over the life of your loan.Mr Koch said to look out for the following when refinancing:
- Fees – Ask the new lender to waive upfront fees
- Break costs – If you refinance from a fixed-rate loan before the fixed term is up, you could incur significant break costs
- Cashback deals – The allure of cold hard cash can be tempting but you should also consider the interest rate being offered
- Avoiding an ugly revert rate – Fixed rate loans usually revert to a standard variable interest rate after a pre-determined amount of time, which is often much higher than the market average variable rate
For more information, please contact:
Sarah Orr | 0401 044 292| [email protected]
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