With the Reserve Bank expected to cut official interest rates even deeper into uncharted territory next Tuesday, and banks carefully calculating how much to pass on to customers, experts are urging borrowers to hunt for the best deal they can find.
Hundreds of dollars per month and up to hundreds of thousands of dollars in the long term can be saved by trading an uncompetitive mortgage interest rate for a better one.
“Near enough 80 per cent of the market banks with one of the big four,” according to Canstar Group Executive of Financial Services Steve Mickenbecker.
“If you’ve had a loan with them for four or five years, you’re probably paying [about] 4.11 per cent.
“Compare that with the lowest price in the market– 2.89 per cent – and that will save you $361 a month and $123,000 over the life of the loan [on a $500,000 loan over 30 years].”
When will the RBA cut again?
Financial markets are pricing an 82 per cent chance of another RBA rate cut in October, which would be the third cut of the year and would see the cash rate fall to a new record low 0.75 per cent.
But several major economists, including those from NAB, AMP and JP Morgan, expect the Reserve Bank to go further – predicting a cash rate of 0.5 per cent by the end of the year – sighting a stubbornly high unemployment rate and below-target inflation.
“It’s mostly a debate about timing,” according to Evan Lucas, Chief Market Strategist at InvestSMART, who adds that the big banks will pass at least “some” of it on to borrowers.
Those with savings accounts with the major banks are seeing their already-low returns dropping further.
ANZ on Tuesday announced it is cutting its base savings rate to 0.1 per cent.
The move follows a similar cut from Westpac last Friday.
Moves like this often fly beneath the radar, with Canstar research showing 55 per cent of Australians are not sure what their savings rate is.
Unfortunately for savers, the only way to maintain interest on their deposits is to be constantly vigilant.
“With deposits, you need to be shopping when things change. Shop when you’ve got to switch – if you’re in one of those introductory rates, shop then. Any time your interest rate changes, shop again. And then shop every six months.”
Original Source: 9news.com.au