February 05, 2013
In spite of the housing and retail sectors rallying for a rate cut to spur on spending, Mortgage Choice is hopeful that existing and potential mortgage holders will view the decision by the Reserve Bank of Australia to leave the cash rate on hold at 3.0% as a positive.
Head of Corporate Affairs at Mortgage Choice, Belinda Williamson, explained that there are a number of encouraging signs in the property market that should buoy positive consumer and business sentiment.
“Although the official interest rate remains static for the month ahead, Australians should take a glass half-full view of the situation. Further rate cuts are expected in the coming months but for now borrowers shouldn't lose sight of the fact that rates are at an historical low and this is good news for anyone looking to enter the property market,” Ms Williamson said.
“With rates low, it isn't just those looking to purchase property that can capitalise on the benefits. Those who already have a mortgage can potentially make savings on their current loan – they just need to know where to start and what changes to make.
“Mortgage holders should invest time to researching and comparing their loan options to ensure they are still getting the best deal for their needs. You might find that you can switch lenders and save, or you can use the new found information to negotiate a better deal with your current lender.
“Keep in mind, however, that if you apply for loan pre-approval with another lender to switch or to try to boost your negotiating power, it will be recorded in your credit file and multiple loan applications can impact your credit rating and hence your ability to borrow in future.”
Ms Williamson reminded borrowers that they didn't need an official interest rate cut to help them repay their loan sooner. For those eager to make savings, she offered Mortgage Choice's top five tips for the month:
1. Gather all the facts. Research the loan options available in today's market to ensure that your loan is still the most suitable and cost effective for your needs. If it isn't, make it your goal for the month to negotiate a better deal with your current lender or investigate refinancing.
2. Speak with a professional. If you don't feel comfortable heading into the loan market alone, ask for professional help from a mortgage broker who has good lender relationships and can use these to negotiate a better deal on your current loan or help you switch to a new loan with a different lender.
3. Budget to be in a better position. You may find that you can make savings elsewhere in your budget such as bulk-buying groceries, cutting back on takeaway, etc. Rather than putting those savings into your wallet and increasing the temptation to spend it, use it to increase the amount you regularly repay on your loan.
4. Up the ante on repayments. Switching your monthly repayment to fortnightly may make a big difference. Most lenders calculate a fortnightly repayment by simply halving the monthly amount. Since there are 26 fortnights in the year, this is the equivalent of making 13 monthly repayments. The savings, based on a $300,000 loan at 5.9% equates to over $70,000 in interest and over 5 years off the loan term. Investigate your lender's repayment options and compare the savings you can make with each.
5. Offset any concerns with savings. Depositing savings into an offset account that is attached to a home loan can help to reduce the interest accrued on a loan. Ask your mortgage broker if you have an offset account attached to your loan and if you do, make sure you are using it to your advantage.
For further information or to arrange an interview, please contact:
Mortgage Choice Corporate Affairs
(02) 8907 0472 / 0407 416 124
(02) 9018 8603 / 0412 550 004