The Reserve Bank's move of dropping the official cash rate to a record low of 1.5 per cent gives borrowers a chance to reduce their home loan even faster. However, a lot of borrowers may be clueless on how to actually take advantage of the benefits of the rate cut.
The major banks did not pass on the full rate cut, so financial comparison website Mozo's spokeswoman Kirsty Lamont advised borrowers to "be prepared to act if your lender doesn't pass through the cut."
"The big banks are unlikely to pass through the full rate cut to mortgage customers this time around as increased costs of funding pressures are squeezing their margins," she said. "So if your lender holds out, shop around and get yourself a better deal."
Lamont also suggested that borrowers keep their repayments at higher levels than the minimum amount so that they are not only paying the interest, but also the principal.
"Even if your lender passes on the rate cut, keeping your repayments the same is an easy way to slash your mortgage down to size," she said. "By maintaining the current monthly repayment on a $300,000 loan, the average mortgage customers could save a hefty $15,071 in interest over the life of the loan."
Meanwhile, Homeloanexpert.com.au's managing director Otto Dargan advises customers to ask help from the experts if they want to score better mortgage deals.
"Borrowers should check their rate with their mortgage broker to see if it's still competitive," he said. Dargan defines a good fixed rate to be somewhere within the three per cent territory.
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