With recent news of the RBA keeping the cash rate at 1.5% for the 14th consecutive month, home lenders are advised to refrain from fixing their interest rates on their home loans. Banks hold at least 60% of their loan assets directly to housing. Research by ABS in 2015 also showed that the household debt to income ratio is on the increase. This means for every $1 of income earned by Australians nearly $2 of debt is accumulated.
It comes as no surprise that Aussies constantly seek ways to curb their debt where possible. Despite the slow pace of the economy in terms of establishing its accelerated growth from last year in terms of the property market, home loan customers can now cash in on the low cash rate. If you are a home loan customer you can grin from ear to ear when you hear these 5 hidden gems that you can cash on in during the low cash rate.
Variable rates are your new best friend
When it comes to saving on rates; variable rates are lower than fixed rates. Both have pros and cons, but in the current atmosphere variable rates will see you saving more. You need to keep in mind that a 4.5% versus 4% for a loan that is $500,000 can end up costing you $175 a month. Keeping it at a fixed variable could mean you could possibly cough up more. Canstar recently did an analysis that showed that variable rates for loans currently on the market sit at a 3.39%. Fixed rates could end up costing the borrower more, when the years accumulate with the lowest rate at 3.49%.
Going nowhere slowly
What this means is that home loan customers with variable rates can relax a little bit longer. According to the Herald Sun variable rates will not be rising anytime soon. Economists predict that due to the cash rate remaining at 1.5% for the past 14 months, there probably will not be any changes in the following two years.
How low can you go?
Lenders take the cash rate as one of the determining factors as to whether they can loan you the money at what percentage. Lenders want to make sure that investments look attractive and secure for customers, and that their rates are competitive, and regulation requirements are met. This means that interest rates are unlikely to move during this time. This is the perfect time for home loan customers with a variable fixed rates to cash in.
Is it really open season?
There are many banks that are currently looking for business, and if you are armed with good negotiating skills you can talk your way into maintaining a low interest rate on your mortgage repayments. Look around at your lenders competitors and see what are the best deals out there. If you can come to the party waving a better deal, they will see that they could lose a potential customer and be open to negotiation.