In the preceding days, there was much hype in the media regarding the first interest rate decision for the year, and few leading economists tipped a rate reduction.
The intention of the RBA in making a rate reduction is to stimulate spending – no doubt you’ve seen lower petrol prices lately, but those alone have not been sufficient to lift our economy.
What does a rate reduction mean to you?
It all depends on the amount of your mortgage, who you have your mortgage with and how much of the rate reduction they pass on – by way of example: if your lender passes on the full reduction, and you have a mortgage of $300,000, you will save approximately $47 – $50 per month.
Should I change lenders if I don’t receive the full benefit of the rate reduction?
While changing lenders is certainly worth investigating…the final decision will depend on a number of factors such as:
- whether your loan is fixed or variable
- the effective interest rate (you should never compare advertised rates as they usually don’t take into account other fees and charges)
- the relationship you have with your lender
The Tax Chic’s tip:
If financially viable for you, it may be prudent to “ignore” any interest rate reduction provided by your bank and maintain your repayments at their current level – this will help reduce your overall interest and the life of your loan – just a thought!