Paul's Insights: Rate cut spells time to shop around
Greater Bank for instance is offering 2.99% on a 1-year fixed home loan. Mortgage House has a variable rate of 3.29%. These are loan rates I’ve never seen in my lifetime...63 years!
I certainly wouldn’t be fixing my home loan in the current climate. Interest rates are unpredictable but plenty of economists are forecasting more rate cuts to follow.
What matters right now is that you take a very close look at how your lender has responded to the Reserve Bank’s rate cut. There’s been a massive difference in the willingness of lenders to pass rate cuts on to their home loan customers.
The Commonwealth Bank was quick to cut its variable rate by the full 0.25%. Westpac on the other hand, is only passing on 0.2% to its owner occupier customers, and ANZ has lowered its variable rate by just 0.18%.
On a $400,000 mortgage, a 0.25% rate cut is the equivalent of saving around $60 a month or $720 each year. So it’s a saving worth having.
If you think your home loan lender is holding back on rate savings, pick up the phone and demand a better deal. Talk to a mortgage broker or do your own research to see what else is available in the market.
The flipside to lower home loan rates is that anyone with cash savings is feeling the pinch of lower returns. That makes it equally important to shop around for a decent rate.
Online savings accounts are paying, on average, 2.15%. That’s bound to fall following the Reserve Bank’s rate cut, but here too there’s a big variation on the return your money can earn.
At the higher end of the scale, HSBC is paying 3.10%, and RaboBank has a savings account with a rate of 3.05%. The catch is that both are 4-month introductory specials. For a consistent return, ME Bank’s online saver is paying 2.85%.
Check what your spare cash is earning to see if you could do better. Comparison sites like RateCity or Finder make it easy to find out which banks are paying the top rates.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Frequently Asked Questions about this Article…
Shopping around for a new home loan rate is important because lenders vary significantly in how they pass on rate cuts. By comparing rates, you could save money each month, especially if your current lender isn't offering the best deal.
A 0.25% rate cut on a $400,000 mortgage can save you around $60 a month or $720 each year. It's a significant saving that makes it worthwhile to ensure your lender is passing on the full rate cut.
If your lender isn't passing on rate cuts, consider contacting them to negotiate a better deal. You can also explore other options by talking to a mortgage broker or researching alternative lenders.
In the current climate, fixed home loan rates may not be the best option due to the unpredictability of interest rates and the potential for further rate cuts. It's important to weigh the pros and cons before deciding.
Savings account rates tend to decrease following rate cuts, impacting the returns on your cash savings. It's crucial to shop around for competitive rates to maximize your savings returns.
HSBC and RaboBank are offering competitive savings account rates of 3.10% and 3.05%, respectively, though these are introductory specials. For consistent returns, ME Bank offers a rate of 2.85%.
You can find the best savings account rates by using comparison sites like RateCity or Finder. These platforms make it easy to compare rates and find the top-paying banks for your savings.
Paul Clitheroe is the Chairman of InvestSMART and the Australian Government Financial Literacy Board. He is also the chief commentator for Money Magazine, providing insights and advice on financial matters.
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