If there are runaway winners in the Reserve Bank’s decision to slash the cash rate to a record low of 1.75 per cent, then that would have to be first-time home buyers and mortgage holders, as it made the cost of borrowing home loans more affordable than ever. Similarly, homeowners on a variable rate mortgage can also expect reductions in monthly mortgage payments.
According to Mortgage Choice spokeswoman Jessica Darnbrough, this could mean savings of as much as $50 a month, depending on the mortgage size. Finder.com.au’s Bessie Hassan also pointed out the possibility of saving thousands in the long run as most big banks pass on the full rate cut to borrowers.
“Based on the average national home loan size of $357,000, a 0.2 per cent reduction from the average standard variable rate of 5.12 per cent to 4.92 per cent could save you approximately $500 per year, or over $15,000 over the life of your loan.”
However, first home buyers still in the process of saving a deposit may not welcome the lower saving rates. Angus Raine, executive chairman of Raine & Horne, even said that the rate slash encourages sellers more than buyers, as there is a huge shortage of listings in capital cities.
“Since January this year, a lot of prospective sellers have been sitting on their hands and the looming federal election hasn’t helped,” Raine said. “This will spur sellers to put their homes on the market, particularly in spring once the election is over.”
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan