WHAT’S YOUR RATE?

Being complacent can cost you thousands, writes Sophie Elsworth

MANY Australians remain clueless about the interest rates on their debts and could be paying too much.

The Reserve Bank of Australia’s decision to slash the cash rate to 0.5 per cent this month resulted in many banks – including the big four – passing on the full 0.25 percentage point drop to mortgage customers.

Despite this, personal loan and credit card rates still remain relatively high and are often in the double-digit range.

A YouGov Galaxy poll commissioned by MoneysaverHQ in partnership with SocietyOne quizzed 1000 Australians and found while a majority (54 per cent) were aware of the interest rates they were paying on their debts, 46 per cent had no clue.

And only 26 per cent of people knew the RBA’s official cash rate was below 1 per cent.

SocietyOne’s chief executive officer, Mark Jones, said Australians should know the rates they were paying on their deals to ensure they were not getting gouged.

“They should know because it’s an important part of their household budget,” he said. “A lot of debts in the Australian economy are variable, so when you take out a mortgage or a credit card the rate is true at the time but it moves over time.”

Mortgage prices have continued to fall in recent years and many fixed and variable rate deals now have a “2” in front.

While the cheapest credit card deals are as low as 7.49 per cent and personal loans vary, fixed rate unsecured loans can be down in the 7 per cent range.

Tribeca Financial’s chief executive officer, Ryan Watson, said it was important to put pressure on your lender and ask for the best deal possible.

“It actually pays to know what your interest rate is and compare it regularly with other providers in the market,” he said. “It can save you thousands of dollars.

“Another reason why it pays to know your interest rate is that a trick the banks often use over time is what I like to call ‘interest rate creep’.

“They sneakily increase your interest rate, little by little, and it ends up hurting your hip pocket.” He said, if you were questioning a lender about the interest rate you were paying, to make sure you understood the best deals that were available.

The Mortgage and Finance Association of Australia’s chief executive officer, Mike Felton, said people should check all rates they were being charged.

“It’s essential that customers know the actual mortgage rate they are paying, as well as all fees and charges, so that they can compare to what is available in the market,” he said.

“We would recommend that a customer assesses their home loan at least once annually to ensure that they are getting a competitive rate.”