Tomorrow the Reserve Bank of Australia will meet to decide whether the official cash rate should stay as is, or be slashed to under 2%. The push for this RBA rate cut after such a long period of stability is due to several factors but namely the falling price of goods and services that lead to deflation and a drop in the Australian dollar last week.
So a cash rate reduction would be great news for borrowers, right? Well, according to recent news reports even if the Reserve Bank does decide to be so generous, banks have been tipped to play the scrooge and fail to pass on these savings to home loan customers. And those that do pass on a rate cut, may in fact lift rates later in the year independently of the RBA like they did last year.
While there’s plenty of uncertainty around what the banks will do if the Reserve Bank does drop the official cash rate tomorrow, there is one way you can give yourself a rate cut – refinancing to a better deal.
Our database shows that the average rate is currently 4.73%, whereas the lowest rate in our database is just 3.86%. Let’s take a look to see just how much a homeowner with a $600,000 mortgage would save by giving themselves a rate cut:
|Average mortgage rate – 4.73%||Average mortgage rate after 25 basis point rate cut – 4.48%||Lowest rate in our database – 3.86%|
|Interest paid over 25 years||$424,142||$398,456||$336,247|
See what we mean? Even if your provider gives you a rate cut, the savings made on an average home loan won’t be anywhere near what you could get by switching to one of the best deals in the market.
If you would like to see how much you could save by refinancing, punch in your details into our Switch & Save Calculator, which will pull some of the cheapest mortgage deals available for your situation.