How to make the most of the rate cut

The effect of Tuesday’s interest rate cut by the Reserve Bank will be felt by the entire nation. For home owners, lower rates mean – cue cheering – lower monthly repayments, whilst savers are forced to live with lower returns on their hard-earned cash.

Which ever category you fall into, we’ve got the low-down on how to make the rate cut work for you…

Borrowers

For home owners, the rate cut is the perfect early Christmas present – equating to a saving of around $50 each month for the average Aussie. Whilst $50 is a tidy sum, there are some much bigger prizes on offer for those not afraid to do the leg-work and switch home loans.

To begin your search, be sure to run your current loan through our award-winning home loan health check. In 30 seconds you’ll know exactly how much you could save by making a switch.

Variable Rates

The banks have already started passing on Tuesday’s rate cut, with NAB the only big bank to not pass on the full 0.25% discount (shame on you!). Though this will certainly make for nice reading on your next monthly statement, there is still a huge gap between the Big 4 and the nation’s cheaper lenders.

For a standard home loan of $300,000 repaid of 25 years, making the switch from a Big 4 standard variable loan to the the loans.com.au dream loan express could save you over $60,000.

Top Picks:
– ING Direct Mortgage Simplifier: 6.77% p.a. (comparison rate)
– Loans.com.au Dream Catcher: 6.95% p.a. (comparison rate)
– State Custodians Standard Variable Offset: 6.92% p.a. (comparison rate)

Fixed Rates

Fixed rate home loans are great value at present, so it’s an excellent time to look at fixing at least part of your loan. Even with the interest rate cut factored in, there are plenty of fixed loans offering rates much lower than their variable counterparts.

Top Picks:
– Greater Building Society Fixed Great Rate: 1 year fixed @ 5.94%
– Newcastle Permanent Fixed Rate: 1, 2 or 3 years fixed @ 5.99%
– AMP Fixed Rate Loan (over $250k): 3 years fixed @ 6.39%

Savers

As the debt-laden are cheering until hoarse on the back of the rate cut, the penny-pinchers amongst us have little to get excited about this week as the rate cut means savings rates will certainly head south. But as always, Mozo has dug out some good opportunities for Australia’s savers…

Term Deposits

Term deposits have taken a beating in the past few months, with the banks preparing early for Tuesday’s rate cut but as variable savings account rates take a big hit, term deposits will become a much more attractive option – just make sure you act fast…

Top Picks:
– Citibank short term deposit: 180 day term @ 5.90%
– St George short term deposit: 150 day term @ 5.80%
– RaboDirect term deposit: 5 year term @ 6.10%

Savings Accounts

The holiday for savers is over it seems, with banks already slashing their headline rates. Joint market leader, UBank, saw fit to take a hefty 0.40% off their USaver account yesterday (did we mention they are backed by NAB? Naughty, naughty!). That said, the likelihood of another rate cut in December is slim, so rates north of 6% still look pretty tasty…

Top Picks:
– RaboDirect High Interest savings: 6.51% for 4 months (standard rate of 6.00%)
– Virgin Saver: 6.51% for 4 months (plus $50 bonus)
– ANZ Online Saver: 6.25% until 31 March 2012 (standard rate of 4.75%)

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Hey! I'm a spender! – Check out Mozo's tips for picking out a great credit card for Christmas…