Bernie Foley
Mob: 0419 109 747

Mortgage Choice
Tel: 08 9376 1922
Fax: 08 9376 1977

Contact Us

Welcome to Mortgage Choice in Dianella

Cash rate rise = $50 per month on $300k mortgage 2% of first homebuyers drop out of the market thanks to decision

Much to the disappointment of existing and potential property owners budgeting for mortgage repayments, variable interest rates will undoubtedly increase over the next few days thanks to today's cash rate rise.

During its third meeting for 2010, the Reserve Bank lifted the official interest rate from 4% to a more ‘neutral' 4.25%. This comes hot on the tail of a 25 basis point increase in March.

According to a recent Mortgage Choice survey of Australians planning to purchase their first home before February 2012, the second cash rate rise for 2010 will see another two percent of first homebuyers pull out of the market if lenders match the move.

Local Mortgage Choice Bernie Foley "Most, if not all, lenders will follow suit regardless of pressure from the government, customers and other parties. Their cost of funding and competition for retail deposits will have a strong influence over this."

"A borrower with a 30-year $300,000 mortgage at 6.5% will see a 25 basis point rise add $49.60 to their monthly repayments. They will be less than $55 away from a minimum repayment of $2,000 per month.

"The March rate rise saw 2.4 percent of our recent first homebuyer survey respondents back out of purchasing in the next two years and now April's rate rise will see another 1.8 percent give up.

"The increase is definitely not a welcome outcome for these potential borrowers but it may be good news for investors and upgraders who are scouring the market for a good deal. Less competition makes purchasing property more attractive for these buyers.

"Interest rates are predicted to continue to rise throughout the year and into 2011, so perhaps it's best that potential buyers who would live close to the edge with making repayments stay out of the market until their financial situation improves.

"Either that, or it's time for them to lower their expectations on the type of property they want and its location. They may even consider the benefits of bringing friends or family onboard as co-owners, as seven percent of our survey respondents were planning to do."

Set resolutions to repay your home loan sooner

This year's tips for budgeting, spending and managing your mortgage

 

Becoming a better budgeter, wising up on spending and making the most of any savings can help borrowers master their mortgage and own their home outright sooner, according to Australia's largest independently-operated mortgage broker, Mortgage Choice.

Company spokesperson, Belinda Williamson said, "If your goal is to pay off your home loan sooner, the beginning of the year is a great time to set new financial resolutions."

"Challenge yourself to ramp up your home loan repayments by readjusting your budget and finding ways to make extra contributions to your mortgage.

"Well thought-out saving, spending and loan repayment strategy decisions can help put you months or even years closer to living mortgage free. Keep in mind even small financial changes can have a big impact on how much interest you pay over the life of your loan and the length of your loan term."

Mortgage Choice offers these financial resolutions to help borrowers own their home outright sooner:

Resolution 1. Become best buddies with your budget
If you don't already have a budget, the New Year is the ideal time to start one. Ensure it factors in all your regular spending - home and/or other loans, utility bills, medical expenses, memberships, grocery bills, insurance costs, etc. Don't forget to include funds for socialising treats. Be honest with your budget and refer to it each time you contemplate a new expense.

Resolution 2. Slash your cash limit
Consider ways to cut your daily spend. For instance, a daily caffeine hit at $4 per weekday equates to $80 per month. Did you know by making a coffee an every-second-day spend and contributing $40 extra per month to your mortgage from day one (based on a $300,000 loan over 30 years at 7%) could reduce the total interest owed by around $31,000 and the loan term by almost 2 years?

Resolution 3. Review your home loan with a fine-toothed comb
There could be underutilised loan features costing you money or features worth refinancing for. Get to know your loan's features. Your mortgage broker can help review your current loan and its features and identify any opportunities to shop around for something better suited to your goals.

Resolution 4. When rates fall, keep repaying more
If your home loan's interest rate has recently fallen, consider keeping your repayments at the higher, pre-fall rate. For example, take a home loan of $300,000 at 7% over 30 years. If your rate reduces to 6.5% and you keep repaying your loan as if the interest rate was still 7%, you could shave approximately 4 years off your loan term and save around $60,000 in interest owed.

Resolution 5. Make the move from monthly to fortnightly
Switching your monthly repayment to fortnightly may make a significant difference to your loan term and the interest owed. There are 12 months and 26 fortnights in one calendar year; by paying fortnightly, you make the equivalent of 13 monthly repayments. The savings, based on a $300,000 loan at 7% equates to around $103,000 in interest and about 6 years and 6 months off the loan term.

Email this page to a friend

Quick Links