Will the lowest rates ever mean great dollar savings?
It's been a little over 24-hours since the RBA announced a cut in rates, to a new historical low of 1.25%.
Since the official announcement, we've had the Federal Treasurer and the Governor of the RBA 'encouraging' the banks to pass on the full rate cut to borrowers. Of the majors, two of them have passed on part of the cut (Westpac and ANZ), CBA and NAB have announced that they will pass on the full cut.
So what does this all mean?
Following the rate announcements, the standard variable rates (for an owner occupied, principal and interest loan) of the majors are:
ANZ - 5.18%
CBA - 5.12%
NAB - 5.11%
Westpac - 5.18%
(Sourced from each of the banks media releases)
All of the banks are delaying the rate cut for a period of time and are only passing on the savings at some point in the future.
Within the media there has been speculation of the dollar savings for an 'average home loan' (often stated as $400K). A saving of $60 per month seems to be regularly used.
We think that there is a lot more to this story. Whilst the above rates from the Big 4 are their publicised rates, new borrowers can often get a cheaper rate. This means that existing borrowers are effectively penalised,
There is also thriving competition between the smaller lenders and some of the niche lenders. Rates that start with a "3" are not uncommon. When you look at the interest rate differential between the standard variable rates and the 'special' rates, the savings that are possible on the same $400K loan start to look more significant. Closer to $6,000 per year, as opposed to $720 per year.
Is it difficult to change your home loan? Sure there can be some paperwork and some time to collate information for the bank. Perhaps the key is to think about how long it would take to earn $6,000 after tax (year after year). When you think about it this way, a couple of hours to have your loan reviewed may be the best investment into time that you can make.
If you would like to have a chat about your loan, our experts are happy to chat. Why not give us a call?