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Mortgage Rate Update

PPG_Blog_October_image 4_mortgage rate update

Whilst the Reserve Bank of Australia (RBA) cut 25 basis points from the national cash rate this month, the four major banks failed to pass that cut on in full. The CBA and NAB lowered their standard variable mortgage rates by 0.2% while Westpac dropped theirs by 0.18%. ANZ recently opted to move away from rate decisions based on RBA announcements, deciding to review their rates on a monthly basis. Thus they are expected to revise their rate any day.

A rate cut of 0.2% on the average $300,000 loan will save borrowers around $30-40 per month. This is still a notable help to many cash strapped Australian families. And there’s talk amongst experts that there may be further cuts over the coming months.

The big four banks have repetitively stated that their funding and other costs are increasingly less dependent on the RBA’s official interest rate and therefore we are likely to see further differentiation in the future. Banks earn the majority of their income from the margin between lending and deposit rates (known as the net interest margin), and the levels of those rates are all important for them to make a profit.

The best way to contest the big banks is to contact smaller lenders to see what they are offering. Rates are often 1% or lower than the banks standard variable rate. Refinancing can involve quite some time and effort but it can also save borrowers tens of thousands of dollars over the term of a loan. In other words, it’s worth considering.

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