So Interest Rates are on hold… But what does that mean?

Variable Interest RateYet again the Reserve Bank Board has met and decided to leave the official interest rate on hold at 3%.  But what does that really mean for you as a mortgage holder?

Regardless of the RBA’s decision, the finance industry is a competitive market at the moment and banks and non-bank lenders are fiercely competing for your business – meaning now is a great time to be renegotiating your mortgage!

We’re conditioned to believe that the interest rate is the single most important element to consider when we’re borrowing money to purchase our first home. But is that really the case? No-one wants to pay more interest than they have to, but other factors may influence our decision more than we realise.

The monthly meetings of the Reserve Bank to set ‘official’ interest rates are always reported in great detail by the media, which helps fuel our obsession with interest rates. However, what we’ve realised over the past year is that the Reserve Bank rates, while influential, don’t necessarily directly affect the rates actually offered for loans. Repeatedly, we’ve seen the major banks refusing to pass on cuts to the official rate by lowering their own home loan rates, or only passing on a portion of the rate cut. But even if they do change their rate, it’ll have no effect on you if you’re on a fixed rate loan.

So how do you get the best deal possible?

1. Ask, and you shall receive

Don’t be afraid to contact your lender and ask what they are prepared to do to for you.

You may be pleasantly surprised with their response, as it’s far easier for them to retain a customer than to have to prospect for a new one.

The fact is, in many loan agreements a rate reductions will not be automatically passed on.  The borrower (you) must request to make reduced payments.  So if you haven’t asked your bank for them to review your repayments, chances are you’re already paying more than you have to.

2. Shop around

 Many people still just stick to the major banks.  That’s a traditional view, which has changed immensely in the past decade with the rise of non-bank lenders and mortgage brokers.

If you believe you don’t have time to shop around for the best deal, why not get a broker to do it for you?  What’s better than saving money on your interest payments?  You don’t even have to pay a broker to do it, the banks will!

3. Be prepared to act

 The perception amongst the major lenders is that they can virtually do what they like because you won’t move on from them, so you may have to prepare to make the move for a better deal. That way, the next time you ask for their best deal they will be sure to know you are prepared to move on if they aren’t willing to offer you the best deal they possibly can.

If you have any questions about buying, owning or selling real estate in Mudgee, please give our Professionals Mudgee Real Estate team a call, or feel free to just pop in for a chat.

Adam & Chandelle Woods

 

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