With the RBA today announcing the first cut to official interest rates in more than seven years, Resi Mortgage Corporation says although it’s still a long road ahead for many borrowers, they should be urged to look at any interest saved and re-direct it to pay down credit cards or loans.

 

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says today’s rate cuts signals the beginning of a predicted downward trend in rates, but acknowledges there are many borrowers still credit stressed, so every rate reduction from now on will provide new opportunities for them to address their financial situation.

 

Montgomery says, “All lenders will be looking at what they can realistically do for their customers, but it’s important that the borrowers themselves see this rate cut for what it is – a step in the right direction.”

 

Borrowers whose lenders pass on the full 0.25 % rate cut announced today will see a reduction of $52 per month on a $300,000 mortgage taken out over 25 years.

 

Montgomery says, “In terms of how mortgage holders respond to any financial advantage gained by today’s announcement, we would urge them to crawl before they walk and continue to exercise restraint with their discretionary spending.”

 

“However if borrowers are in a position to continue repayments on their mortgage at their current levels and do not have to service other high interest debts, they should continue with their current repayments, enabling them to pay off their mortgage sooner.”

 

She adds, “Many fixed home loans have already come down over the last quarter and with this rate cut directly affecting standard variable rates, it’s a positive indication for the future.”

“Despite the impact the credit crunch has had on all lenders over the last year, competition still exists in the marketplace.”

 

Montgomery predicts, “Today’s cut will kickstart new opportunities for borrowers across both the bank and non-bank segments - and that’s great news for everyone.”

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