With today’s fourth successive official rate cut of one percent set to deliver additional savings on interest for mortgage holders, Resi Mortgage Corporation says it’s time for some borrowers to put these savings in perspective and use the opportunity to pay down outstanding high interest debts - many of which have increased further during the same period.

 

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says despite borrowers being given a reprieve through rate cuts, it is clear the message is not getting through to some who continue to spend on credit cards with rates which now commonly hover around twenty percent.

She says: “If borrowers who are still highly geared take the time to compare their mortgage and credit card rates and what each is actually costing them, they can act now to shake off the remaining vestiges of ‘affluenza’ and get rid of their high interest rate credit card debt.”

 

“It’s time for borrowers to decide for themselves: what is good debt and what is bad debt.”

 

 

And with that figure set to increase further when lenders pass on cuts from today’s announcement, borrowers should be able to put this into context and realise that getting rid of credit card debts of several thousand dollars is achievable.

 

	Bank Average
July 2008
Interest Rate	9.61%
Monthly Repayment	$        2,644
Total Interest	$    493,219
November 30, 2008
Interest Rate	7.73%
Monthly Repayment	$        2,262
Total Interest	$   378,615

 

 

Montgomery says whilst mortgage rates are falling it doesn’t make sense for borrowers to continue to juggle multiple high and low interest debts.

 

“Outside of paying off the credit card entirely and reducing its limit, the other clear option is to consolidate their debts into one low interest debt,” she says.

 

Montgomery explains that with the RBA not scheduled to meet in January, the chance of another rate cut is not likely until at least February.

 

She says: “Given that the prime spending time of Christmas falls during that time - now is the time for borrowers to act and avoid the trap of relying on retail credit to get them through. Cash will always be king.”

 

Latest statistics from September from the Australian Bureau of Statistics shows that credit card debt keeps increasing with Australians now owing more than $44 billion on credit.

 

“Borrowers need to acknowledge times have changed and that living within their means is now very much the new black.”

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