Home loan interest rates vary considerably, and many borrowers could be paying much more than they have to. For example, on a standard $300,000 thirty-year loan, borrowers may be wasting as much as $400 every month by paying the highest variable rate on the market rather than taking advantage of some of the rock-bottom rates on offer.

According to the latest analysis from Aussie comparison website Mozo, the lowest variable rate on a standard $300,000 thirty-year loan is just 3.35% compared to the highest variable rate at 5.64%, which is a difference of 2.21%.
This makes monthly repayments at the cheapest end $1,322 per month, compared to $1,730 at the highest end.

The Reserve Bank board has kept the cash rate on hold this month at 1.5%. Inflation figures released last week show that the consumer price index rose by 0.7% in the September quarter, lifting the annual inflation rate from 1% to 1.3%. This reduces the likelihood of a rate cut in the immediate future.   

Kirsty Lamont, director of marketing and communications at Mozo, said borrowers shouldn’t rush to lock in their interest rates. “As long as the cash rate continues to head down, borrowers are probably better off making the most of a competitive variable rate,’’ she said.
“The ideal time for borrowers to consider locking in a longer term fixed rate is when rates are showing signs they are levelling out or about to start increasing. Average 1- and 3-year fixed home loan rates are currently well under the average variable rate of 4.37 per cent, but averages don’t always tell the whole story.”
The cash rate began its downward spiral in November 2011, dropping from 4.75% with 12 cuts, bringing it down to 1.5%. The latest data also shows that the average one- and three-year fixed rates sit at 4.13% and 3.96% respectively. Borrowers will find these deals a lot cheaper than the average variable rate of 4.37%.

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