by Lisa Montgomery

MULTIPLE RATE CUTS A ‘GAME CHANGER’ FOR BORROWERS

If a third successive interest rate cut is delivered early next year, some borrowers will have the opportunity to shave almost twenty percent off the term of their loan, says a leading non-bank lender.

CEO of Resi Mortgage Corporation, Lisa Montgomery, says today’s announcement by the Reserve Bank to drop interest rates by another quarter of a percent is welcome news for borrowers, but when you look at the total financial effect of what three rate cuts can deliver, the benefits can be life changing.

Montgomery says, “If repayments on a $500,000 loan taken over thirty years were kept at the same level prior to the November rate cut, the borrower can potentially reduce the term of their loan by five years and nine months - which equates to almost twenty percent off the term of their loan.

That figure alone is a real game-changer which can significantly improve the financial plans of many mortgage holders – and that’s why they should be looking at that strategy if they are able to.”
 

Loan Amount	Interest saving after November 25bp cut	Potential Time Saving	Interest saving after further 25bp cut  (50bps in total)	Potential Time Saving	Interest saving after further 25bp cut  (75bps in total)	Potential Time Saving
$300,000	$42,261	2 yrs 4 mths	$70,778	4 yrs 2 mths	$91,340	5 yrs 9 mths
$500,000	$70,436	2 yrs 4 mths	$118,340	4 yrs 3 mths	$152,085	5 yrs 9 mths
$700,000	$98,611	2 yrs 4 mths	$165,901	4 yrs 3 mths	$213,277	5 yrs 9 mths

She says: “A third rate reduction will open up a whole range of new opportunities for them to dramatically restructure their financial situation and address any concerns they may still have with debt.

They can either opt to take advantage of being able to make significant savings over the long term, or alternatively, they can free up that cash for immediate financial relief. Either way – each rate cut has the potential to have a significant cumulative financial effect, particularly for those with large loan balances.”

Montgomery adds: “This will add another layer of intensity to the competition between lenders in the marketplace, which has already been a real benefit for borrowers, leading them to be better placed to take full advantage of the situation.”


ENDS

Media Contact:    
Lisa Montgomery,CEO, Resi Mortgage Corporation: (02) 8204 5012 or 0414 592 553 twitter/resihomeloans
Karen Bristow, Kardan Consulting: 02 9967 3245


* Figures based on the current 'big 4' average SVR of 7.55% over a 30 year loan term ,assuming no further changes and all rate cuts are passed on in full.

Published on: 6/12/2011

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