Cup Day chance to back rates winner
ALL EYES ARE ON THE TRACK AND THE RESERVE BANK WHEN IT MEETS TODAY
HOME loan borrowers should be taking swift action if the Reserve Bank of Australia today drops the cash rate on Melbourne Cup Day.
The last time the central bank slashed the rate on Cup Day was back in November 2011 – this is when the downward spiral of rate drops began.
While it’s heavily predicted the cash rate will drop by 0.15 basis points down to 0.1 per cent today, experts say it ultimately means even cheaper deals for customers.
Here’s what you should know and do to ensure you’re getting the best deal possible.
1KNOW YOUR RATE
Aussie’s chief executive officer James Symond says borrowers must check what deal they are on before picking up the phone or speaking to an expert.
Before today’s decision Symond says, “owner occupiers should be paying a rate with a “2” in front and investors should have a “3” in front”.
Canstar’s database shows the lowest owner occupier one-year fixed rate is 1.9 per cent by Reduce Home Loans.
They also have the cheapest owner occupier variable rate loan at 1.89 per cent.
This is for borrowers who have a loan-to-value ratio lower than 60 per cent.
If you’re not getting rates as Symond suggested it is time to take action.
2WILL YOU GET THE RATE CUT?
Canstar’s editor-at-large Effie Zahos says it’s often a waiting game to see what your lender does when the RBA moves.
“Does your lender automatically pass on the rate cut,” she says.
“And are you going to find your repayments are reduced without you wanting them to be.
“It's important to understand the bank’s policy on how they handle these rate cuts.”
Zahos says if possible the best thing to do is to keep repayments at a higher amount than the minimum
repayment required so you can really “knuckle down” on getting rid of the debt quickly. 3GET
The next step is to ensure you can get assistance to drive yourself a better deal.
Symond says, “Information is power. I suggest if someone has an existing loan they speak to their existing lender or broker.
“Find out how your loan compares to a new loan in the marketplace to understand how competitive the loan is”.
For some borrowers this could be daunting so don’t be afraid to ask for help.
EXPERT HELP 4SERVICEABILITY/ RATES
There are some rate deals with a “1” in front and Zahos says banks “will be looking for good serviceability as well”.
“Believe it or not some
lenders will not give you a loan if you’re on Jobkeeper,” she says. Having a good repayment history and steady income will also make the borrower appealing to a lender – whether it be when
negotiating with their existing bank or contacting a new financial institution.
Symond says borrowers need to have a “clean credit history and a reasonable deposit”.
“Borrowers are absolutely in the driver’s seat,” he says.
5WHETHER TO FIX
Many fixed rate deals remain cheaper than variable offers but Symond says borrowers should err with caution before locking in any deal.
“I think we are in a low interest rate environment for some time, be very wary of fixing a loan,” he says.
“It limits your flexibility once you fix in a loan.
“I think fixing a loan is a great idea in the right circumstance but you need advice before you do that so you don’t get stuck.”.