Resi Mortgage Corporation says borrowers are now ‘tuning out’ on official rate announcements as they face the realisation that any further cuts announced by the Reserve Bank may not necessarily translate into rate cuts being passed on by lenders.

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says today’s decision by the Reserve Bank could indicate they are holding back for now on announcing more official cuts because their strategy is not fully benefiting borrowers.

She says: “At the moment there is a wait-and-see approach being shown by the Reserve Bank and as a result most borrowers are not holding their breath anymore.”

Montgomery adds that the new mortgage market may mean further official rate cuts will be announced in increments of more than a quarter of one percent, in order to increase the likelihood of borrowers receiving a more significant portion of any official rate relief than they are now.
 
“But for the meantime, what we are now seeing is most borrowers buckling down and reviewing their financial structure based on what cuts have been currently delivered – and that’s really the best strategy they should be adopting,” she says.

With a $757 monthly repayment reduction already delivered on an average $300,000 loan since August last year*, many borrowers have already started using that relief to apply strategies which will add to their financial position including:

Montgomery says while it’s difficult in the short term to predict what the Reserve Bank will do on a month-by-month basis, borrowers should remind themselves that rates are at historic lows and this represents a perfect time to get their house in order before they rise again.

“If borrowers can keep things simple, the rest will take care of itself,” she says.

 

* Figure compares the current 5.75% average standard variable rate of the big four banks (as of 2/6/09) to the same comparable rate in Aug 08 on a principal and interest loan taken over 25 years.

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