Getting the full benefit of low interest rates?
According to figures by the Reserve Bank of Australia household debt levels and interest payments, on the likes of credit cards, are at their lowest levels since 2009 but are all Australians taking full advantage of the opportunity to reduce their debts and top up their savings?
With interest rates spiralling downwards in the last 18 months to the lowest rates on record, Australians are now spending just 9.8 percent of disposable income on interest, reports the News Limited Network. Although most Australians have seen reductions on their home loan interest rates, mortgage providers can have as much difference as 1-2 percent (or more!) on their interest rates, potentially the difference of a few hundred dollars a month for many mortgage owners. Homeowners should be giving themselves a home loan health check and make sure they aren't losing out by sticking with the wrong lender.
While mortgage lenders may be slashing their rates, credit card providers have not been as quick to act. With many Australians now finding extra money in their pocket, this could be a great time to reduce credit card debts. Seeking out a credit card with a balance transfer offer could be one way to circumnavigate high interest rates, effectively helping to save on repayments and pay off debt faster.
My Budget Director Tammy May told the News Limited Network on what to do with a rate cut. "You could increase your payments to your highest bearing debts to pay them off quicker. You could also have the money you are saving from the interest rate put into an offset account. This could be an emergency account setting yourself up with a buffer in case of emergency. It's very easy just to spend the extra money so it's really important to review your budget and make the most of the extra cash flow."
Those looking to further the savings on their personal finances can compare credit cards, home loans and more on Mozo.
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