Even though the RBA didn’t cut the cash rate this week, borrowers can save as much as $260 a month on mortgage repayments by finding a cheaper home loan, according to market leading online lender, loans.com.au.
Loans.com.au Pty Ltd Managing Director, Marie Mortimer, said there was approximately 1.42 percent difference between comparable products on the higher and lower ends of the home loan interest rate spectrum.
“The big four banks offer variable interest rates of as much as 5.65 percent, and loans.com.au’s rate is 4.23 percent,” Ms Mortimer said.
Every 0.25 percent is worth about $50 a month in higher repayments on a home loan of $300,000. That means, for every 0.25 higher the interest rate, it will cost about an extra $600 each year.
“In effect, if a bank customer refinanced to loans.com.au they would be saving about $260 a month in interest and $93,382 over the life of a $300,000 loan.”
After Tuesday’s announcement that the cash rate would remain steady at 2.25 percent in April, speculation is rife among finance market commentators that the RBA will cut the cash rate another 0.25 percent in May.
“Home loan customers don’t need to wait another month to see what the RBA’s next move will be, they can take action now to start saving money on interest,” Ms Mortimer said.
“Regardless of whether the RBA cuts the cash rate or not, borrowers should still secure the lowest possible interest rate for their home loan.”
Over a 30-year loan term, there would be many interest rate fluctuations and borrowers should take into account the cost of a higher interest rate over the duration of their loan.
“Over the life of a home loan there are periods where interest rates are going to be high, and other times when they will be low,” Ms Mortimer said.
“The key to minimising the interest you pay is to secure a low interest rate from the outset and pay down the loan principal so the effects of interest rate rises are not so pronounced.”