Mortgage rates fall to 2.19%
Banks are under pressure to help borrowers, writes Sophie Elsworth
MORTGAGE customers need to start checking their interest rates to ensure they are not paying too much in the months of economic uncertainty ahead.
The central bank, the Reserve Bank of Australia, slashed the cash rate for the second time this month, to a record low of 0.25 per cent.
All big banks have also passed on some increases to deposit account rates giving savers higher returns on their cash in the bank. The banks have also offered repayment holidays and pauses to interest charges on small business loans while also offering relief to some of these troubled customers who have mortgages.
Reserve Bank of Australia governor Philip Lowe said the nation faced “extraordinary and challenging times” amid the COVID-19 pandemic. As a result, the RBA introduced a range of measures to make borrowing cheaper for banks, and in turn would deliver customers rock-bottom deals.
Home Loan Experts managing director Otto Dargan said for many borrowers, it remained to be seen if they could financially survive the coming months.
“The banks are under funding pressure to not pass on the cut, however, they are also under political pressure to help borrowers,” he said. “Borrowers should talk to their employer now, and if they may lose their income, then talk to their lender now about hardship provisions or their mortgage broker about releasing equity in preparation.”
On Friday, ANZ announced the cheapest home loan rate on the market at just 2.19 per cent on their two-year fixed-rate loan for owner occupiers paying principal and interest.
But in a surprise move, CBA said it would automatically reduce variable borrowers’ repayments to the minimum amount from May 1.
The bank’s chief executive officer, Matt Comyn, said this would “release up to $400 per month for customers and create up to $3.6 billion in additional cash support for the economy”.
Customers can opt out after the change is introduced if they want to keep their repayments at the same level as now.
Financial comparison site RateCity showed, on a $300,000, 30-year, owneroccupier mortgage paying principal and interest, the average existing big four discounted variable rate was 3.61 per cent. If the 0.25 percentage point cut is passed on by lenders it would deliver savings of $42 a month and more than $500 a year. RateCity spokeswoman Sally Tindall said those who wanted to stay ahead of their home loans could find the move by CBA could “slow them down”. She issued a stern warning to all borrowers: “Get your finances in order now because you don’t know what’s down the track.”
Realstate.com.au chief economist Nerida Conisbee urged mortgage customers to take it “day by day”. “There is so much uncertainty at the moment and having lower mortgage repayments is good news for most people,” she said.