Aussies 'are using rate cuts to repay mortgages faster'
Aussies are taking advantage of lower home loan interest rates by paying off their mortgages far quicker.
The Reserve Bank of Australia (RBA) slashed the national cash rate by 75 points in May and June and it seems that homeowners are reaping the benefits.
According to Commonwealth Bank home loans general manager Clive Van Horen, there has been a noticeable rise in the number of people who are increasing their monthly payments since the cash rate was reduced to just 3.5 per cent, National Features reports.
"An increased proportion of customers are ahead in their repayments," he told the news provider.
Mr Van Horen said the bank had previously revealed that 70 per cent of mortgage customers were ahead with their repayments, but this has now risen to the 80 per cent mark.
He feels that the fallout from the global financial crisis may have encouraged people to reassess their priorities and deleveraging is now a "massive trend".
"When the interest rate goes down if you keep your repayment amount the same you are therefore paying off more of the principal and capital portion of the debt," he remarked.
His thoughts were echoed by ANZ mortgages general manager Glenn Haslam, who confirmed that more than half of the bank's customers are at least one month ahead on their repayments.
This is certainly a shrewd move on behalf of Aussie homeowners, as interest rates can be unpredictable and you never know when they may suddenly rise. By settling your mortgage while rates are low, you are obviously saving significant amounts of cash in the long run.
The RBA opted not to lower the official rate this month, but it is still under pressure to make further amendments. Many economists believe that the national rate is likely to fall below 3.5 per cent by the end of 2012.
However, many banks and lenders have been reluctant to pass all of the cuts on to their customers, which makes it even more important to compare the best deals online before committing to a mortgage.