The reduced cash rate has seen a ripple effect, though not quite to the same extent, flow through the lending market. Most banks have passed on a reasonable amount of the cuts, and most borrowers should have seen some form of reduction in their mortgage repayments.
For those looking to make their move into the property game, the recent cuts have provided households with increased borrowing power, allowing you to purchase a higher value property that may have previously been out of your reach or just as importantly allow you to enter the market.
While the east coast is warning that increased borrowing capacity lends to increased property prices, which is seen to have a flow on effect in those cities. in Perth, property prices are lagging ever so slightly, with competition in the property market starting to ramp up.
Along with the reduced rates, lenders are easing on serviceability and making the move into homeownership easier again. So, what do you need to do now?
For our current homeowners, if you have received a full rate reduction, your lower mortgage repayments have freed up funds within your household. This allows for the opportunity to save, invest back into your home or spend discretionarily. However, in the current market, homeowners should actively look at refinancing their loan with a new product or even a new lender. With increased competition in the lender market, not only from the big four, but also emerging smaller lenders, there is great opportunity to be had. Not to mention great rewards to be captured like cash back offers and airline rewards points are now available with some of our lenders.
A Canstar analysis showed that a borrower with a $400,000 loan and a 3.86 per cent interest rate, who switched to a lower rate of 2.86 per cent, as an example, could save up to $93,794 in interest over the period of their loan. As an additional way to cut your loan down quicker, and cheaper, is to refinance at a lower rate, but maintain your current repayment level. Canstar also went on to say on the above example, the loan could be paid off more than four years quicker on the reduced rate and existing repayments.
There are never any guarantees to when rates, and house prices will move. Indicators in one city may be entirely different to another. It is important to go into big financial decisions armed with as much information as possible and knowing what you want to achieve.
If you are ready to make a move speak with our team today.
Source: https://www.domain.com.au/money-markets/what-home-owners-and-home-buyers-can-do-to-take-advantage-of-low-interest-rates-902016/