Press Release - Savvy Borrowers Expected to Take Further Advantage From Latest Round of Tax Cuts
by Lisa Montgomery
SAVVY BORROWERS EXPECTED TO TAKE FURTHER ADVANTAGE FROM LATEST ROUND OF RATE CUTS
Resi Mortgage Corporation says after today’s official rate cut of one percent delivered another significant saving to Australian mortgage holders, savvy borrowers will now be able to exercise a greater range of options in relation to getting the most from their home loan.
Resi’s Head of Consumer Advocacy, Lisa Montgomery, says it’s clearly now a borrower’s market and today’s large reduction in official interest rates will certainly deliver more flexibility back to the consumer.
She says: “This latest cut means a borrower is potentially $744 per month better off since August last year, based on a $300,000 average standard variable loan taken out over 25 years* - so canny borrowers will be really doing their homework to see how they can take further advantage of this.”
Montgomery says there are several simple loan strategies all borrowers can consider during this period to allow them to take advantage of the downward trend in rates:
- Keep your mortgage repayments at their August 2008 level. If your loan structure allows for it you can choose to keep your repayments at the old level, thereby taking advantage of the lower current interest rate by paying down more principal and saving interest over the life of the loan, allowing you to pay out your loan earlier.
- Reduce high interest debt. Most credit cards and personal loans haven’t experienced the same reductions in interest rate over the past six months and are costing consumers significantly every month. It makes sense to reduce or pay these off completely with any surplus gained from a mortgage rate reduction.
- Create a buffer for unexpected events. Rate cuts should be used to pay off any outstanding credit still left over from when rates were higher. By keeping your mortgage as your only key credit obligation, other money can be put aside and kept as a buffer for unexpected events such as job loss.
- Pay for renovations to your property in cash. With the savings gained from interest rate cuts, you can continue your repayments and save the extra cash to carry out major or minor work to your property, rather than having to draw down extra funds. This will add value to your property without adding to your mortgage.
- Refinance. By speaking to your lender you will be better able to determine if there is now a more appropriate loan for your circumstances. With such a large drop in rates over the last six months, even when break costs are factored in, it could still be in your best interest to switch loans or lenders. But ensure firstly that you shop around.
”Whether borrowers decide to reorganise their cash-flow, restructure their existing loan or completely refinance, the time to act has never been better and will significantly improve their financial footing over the long term,” Montgomery added.
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Published on: 3/02/2009
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