How to maximise falling mortgage rates

The Reserve Bank of Australia (RBA) had a back-to-back interest rate cut this year, setting the cash rate at a record low of 1.00%. Lenders had started applying the cut to their variable home loans. This is good news for Aussies with mortgages because this means borrowing large sums of money becomes cheaper.

If you are having hard time keeping up with the falling mortgage rates and thinking of the best step to make the most out of these cuts, here are some tips:

Refinance to a lower interest rate

It’s always worth checking and comparing the deals available in the market. Hundreds of products are being offered by many lenders out there. Shop around and see if your bank can match the deal you have found. As a mortgage broker, I can help you find the most suitable deal for your current situation and help you switch to it.

Make extra repayments

Lower rate means lower repayments. The money you can save from it can be spent on electricity bills or groceries. However, if you wish to get out of debt faster and save yourself from more interest in the long run, don’t change a thing. Just keep paying the same monthly repayment and this will now count as extra repayments.

Save for the future

While current rates keep getting low, there is no assurance that there won’t be any rise in the future. Keep the money and create a buffer savings when your repayments increased.

The takeaway

To fully take advantage of the falling mortgage rates, you need to know what your home loan interest rate is. You can always pick up the phone and ask your lender or mortgage broker about it. Take advantage of the hundreds of deals in the market that you can compare and see what will fit your current situation.

If you are a busy person and don’t have much time to do all of these, feel free to give me a call on 0408 081 082. I can conduct a complimentary home loan health check and advise you on the steps we can take to fully maximise the current interest rates that will work for your financial situation.

Disclaimer:

Credit Representative Number 486927 is authorised under Australian Credit Licence 389328.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

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Has your bank passed the RBA interest rate cut on?

Experts widely predicted a rate cut would follow after the Federal Election and during May, many lenders started to cut rates on both variable and fixed rate home loan products in anticipation of the June 2019 decision.

Now that the RBA officially cuts the rate by 25 basis points, leaving it at a record low of 1.25%, has your bank follow suit? If you’re dissatisfied and want to explore other options to maximise your potential savings, you can always opt to switch, especially now that a raft of lenders are expected to follow with rate cuts of their own.

Let’s assume you have 25 years left on your mortgage, you still owe $400,000 and your current interest rate is 4.30% (which is the average variable owner-occupier rate on the RateCity.com.au database). Here’s how a drop to 4.05% might improve your financial position:

*Figures based on variable loan paying principal and interest. Does not include fees.

If your bank doesn’t pass on the full cut, you’re still in a strong position as there are a wide range of lenders out there. I can help you shop around for a more competitive deal.

Reference: Business Insider Australia, Now that the RBA has cut the official cash rate, here’s how you can benefit

Disclaimer:

Credit Representative Number 486927 is authorised under Australian Credit Licence 389328.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

The post RBA Cuts Rate: Has your bank passed the interest rate cut on? appeared first on Soul Finance Group.

It’s a Christmas treat from RBA as it holds rates at 1.5%

Last December 6^th, RBA decided to leave the cash rate on hold at 1.5%. Although this had been widely predicted by analysts and economists, mortgage holders can surely reap its benefits. You may hear finance brokers (myself included) encouraging you to lock in your rate now or refinance and find a better deal—and you have to! But before I’d get into that, let me give you a refresher on RBA’s role and how does this affect your loan.

“I’m sorry, RBA what?”

Not everyone is well-versed in the world of finance. The common thinking is having the desire to secure a loan, submit the necessary documents to your chosen lender and you will have to pay the mortgage payment depending on the interest rate given. Pretty simple, right? So what does RBA have to do with this? As discussed before in this blog, Reserve Bank of Australia (RBA) is Australia’s central bank. This is where commercial banks get some of the money they lend their clients. Operative word is “some” because there are other factors such as deposits from bank customers. Anyway, so it just makes sense that RBA decides on how much interest rate to set on overnight loans depending on so many factors. If you wish to learn more, you can visit their website.

“RBA holds rates…what now?”

When RBA decides on the rate, it affects other interest rates across the financial sector. It influences the actions of the lenders and borrowers affecting the state of the economy in general. The decision had been widely anticipated, and although this is the lowest the interest rate had reached, experts are warning of rate rises next year. The board might have hold it for now, but it doesn’t mean you should expect it to remain unchanged in the future.

Here are some of the ways to manage the possible impact of rate change in your finances:

• Pay off your credit card debt.

Should rates increase, it just makes sense to settle your credit card debt initially. This will help you pay a smaller amount of interest because of your reduced debt.

• Make extra home loan repayments.

If you have extra cash and your loan allows you to make extra repayments, then take advantage. In that case, once interest rates rise, your outstanding balance is minimised.

• Think about refinancing or consolidating your debts.

With experts warning mortgage holders with rates rise in 2017, think about looking for a more competitive deal than your current loan. As your finance broker, I can help you look for a deal where you can reduce your payment and will help you ease your struggle from making your loan repayments. You also have the option of consolidating all your debt into one loan which will hugely save you a whole lot of stress and money.

• Lock in your rate.

Financial analysts and economists reckon this is the bottom of interest rate. Consequently, locking in a rate now is a wise move. In that case, should interest rates increase, you are secured with this super low rate.

It is indeed a merry Christmas treat since mortgage holders need not worry about their current rate. However, we can’t always be sure of the future so it’s good to always plan ahead! If you have questions, please feel free to contact me, I am more than happy to help, explain the whole process for you, and help you every step of the way.

Disclaimer:

Credit Representative (486927) is authorised under Australian Credit Licence 389328.

Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.

The post A Christmas Treat for Homeowners and Mortgage Holders appeared first on Soul Finance Group.

RBA decided to lower the cash rate to 1.5%. How will it affect the interest rate? | Photo: Dan Himbrechts

Let’s face it. Not everyone is well-versed in the financial industry so when something like “RBA cuts cash rate to an all-time low of 1.5%” comes in the news, some people don’t really know what it means. They have no idea how it affects their current interest rate. You don’t necessarily need to memorise the financial terms to understand how your home loan rates benefit from RBA cuts.

This is what this article is all about. What is the connection of the cut in cash rate to your loan interest rates? What is a cash rate? And just what in the world is RBA’s role?

What is the RBA, anyway?

RBA stands for Reserve Bank of Australia and is a statutory authority—meaning, it’s a body set up by law (see Reserve Bank Act of 1959) which is authorised to enact legislation (cut interest rate, for instance) on behalf of the relevant country or state (in this case, Australia).

RBA is Australia’s central bank. It provides banking services to some government, commercial bank and other clients, except the general public. It does not contain banking facilities so it is not considered a commercial bank.

So what does RBA do?

Say, for instance, you want a new home but you don’t have enough funds. One of the effective ways is to borrow from a commercial bank. Your commercial bank gets the money you need from the RBA. Of course, you are not the only one who wants a home, so imagine the amount of demand at this point.

RBA, then, lends money to these commercial banks and offers a rate. This is the official cash rate. One of their responsibilities is to meet every first Tuesday of the month to decide whether to raise the rate, lower it or keep it the same. Their decision is of course influenced by a wide range of factors.

How does RBA cut affect your home loan?

Banks and other lenders all over the country use the RBA’s official cash rate as the benchmark for the rates they offer. The Reserve Bank will lower the interest rate in order to stimulate growth. The interest rate is basically the cost of money so a low interest rate will reduce the cost of borrowing for you. A possible outcome is that you will have greater access to funds and will, therefore, increase your spending, which helps the economy.

Take advantage of the low interest rate.

If you have a home loan, low cash rate means you will be paying slightly less on your mortgage. If you are planning on securing a loan, now is the best time to take advantage of the low cash rate. However, not all banks pass on the full rate cut so if you wish to know if your bank did, or you may want to transfer your mortgage, you should consult your finance broker.

Source: http://www.rba.gov.au/monetary-policy/about.html

The post The truth about interest rate cut: how it affects you appeared first on Soul Finance Group.