Behind all of the media hype about whether banks are passing on the full interest rate cuts,
there’s a real “have vs have-nots” story playing out right at home.
Since June this year, the RBA has dropped interest rates by 0.75%, and the banks have, on
average, passed on approximately 0.55%. In most cases, these rate drops have been
passed on to existing customers automatically, which means a household with a $500,000
variable interest rate mortgage would be saving at least $156 per month.
However although the smarter money has taken the opportunity to beat the banks and
ensure they use this period to pay down their loans faster, most mortgage repayments are
set on minimum repayment schedules.
Minimum repayment schedules mean that as interest rates drop, so do the mortgage
repayments, but the extra just “disappears” in groceries, and other daily spending
opportunities.
Lanie from Surf Coast Finance explains, “What the banks don’t want people to know is that if
they actively told the bank to keep repayments at the same level as they were back in May,
almost $37,000 would stay in the borrower’s pocket rather than the bank’s. And the
mortgage would be paid off 3 years earlier.”
The government don’t want this widely acted upon either though, because they want that
$156 per month spent to “stimulate the economy”.
But with household debt at all-time highs, and rates at all-time lows, it’s the perfect time to
take control, and work to a goal of debt freedom.
Lanie adds, “When making that phone call to the bank, borrowers need to beat the bank at
their own game, and increase the amount of set repayments by an additional $100 per
month to save around $56,000 and 5 years off the home loan. For many, that may honestly
be the difference between retirement at 65 vs 70.”
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For more tips & advice, contact Lanie Conquest or Nicola Tucker at Surf Coast Finance
With over 25 years’ banking & financial services experience, we help local families & businesses make smart financing decisions.
M: 0418 938 646 ( Lanie Conquest)
E: lanie@surfcoastfinance.com.au
M: 0491 020 810 ( Nicola Tucker)
E: nicola@surfcoastfinance.com.au
W: surfcoastfinance.com.au