The Reserve Bank of Australia (RBA) yesterday held the official cash rate at its current record low of 0.75%, in a widely expected and welcomed move. However, while the latest data has provided “breathing room,” further cuts are likely imminent meaning borrowers and their brokers must remain vigilant.
“We cannot rule out the possibility of another cash rate cut in the near future, which means borrowers need to be prepared to negotiate a better home loan deal, or speak to an experienced mortgage broker who can haggle with lenders on their behalf,” said Mortgage Choice CEO Susan Mitchell.
Mitchell encouraged borrowers to reach out to a mortgage broker to find out what their options are, especially if they’ve been in the same home loan for more than two years.
“If you are able to access a lower interest rate, you might want to consider keeping your repayments at the same rate and pay off your home loan sooner,” she added.
Canstar finance commentator Effie Zahos, also highlighted the opportunity for savings presented by the current lending landscape.
“Borrowers maintaining their home loan repayments on pre-cut levels in a period of falling interest rates and in a record low interest rate environment is the right combination to see homeowners get ahead," she explained.
“Mortgage holders are catching on and preparing for potential tougher times ahead and building a financial buffer.
“Home loan borrowers who have done nothing, that is kept their repayments at pre-cut levels, could find themselves with a $7,000 bonus sitting in their redraw account after 5 years.
“Borrowers who have had their loan for three years or more and have not renegotiated a better rate with their lender, are likely on an interest rate of around 4.04%. These homeowners could be paying up to 1.35% more than they need to be given the lowest variable rate today is 2.64%.”
Despite yesterday's decision to keep the rate on hold, Loan Market chairman Sam White has predicted a "spike in activity" for brokers over the remainder of the year.
“The RBA’s decision to keep the cash rate at 0.75% shouldn’t soften market activity. In fact, it’s likely to encourage more customers - new borrowers and refinancers - who have been frustrated by the majors to engage a broker and find a better outcome for themselves.”