How to Cut Hundreds of Dollars From Your Interest Rate
Every time the Reserve Bank of Australia has raised interest rates in recent months, Jessica’s bank has passed on the hike.
She adjusted her budget each month and tried to reduce her expenses so that she could continue to save money.
“I wanted to keep a savings reserve, but that reserve was shrinking every month with every rise in interest rates,” she told NCA NewsWire.
Eventually, Jessica realized she had to do something else.
After a friend mentioned her interest rate at another bank was lower, Jessica called her lender and asked for a better deal.
“It was as simple as that – I spoke to someone on the phone and they took 0.5% off my interest rate. I was so happy,” she said.
Finspo co-founder and chief executive Angus Gilfillan told NCA NewsWire that simply asking your bank for a better deal could be a quick and easy option to improve your current rate.
“However, you may miss out on more competitive options in the market if you stop there,” he said.
“You can also go the do-it-yourself route of finding the best deal, but comparing all the repayment offers, rates, switching costs, features and benefits of the thousands of loan options available can be quite tricky.
“So one of the best ways to compare apples to apples is to speak with a mortgage broker.”
Even if your bank offers a better deal, Gilfillan said it might still be worth refinancing to maximize your savings.
“A lot of people put refinancing in the ‘too hard’ basket, given how stressful it was to get their home loan in the first place,” he said.
“But without the emotional roller coaster of buying a property, the process of getting a new home loan, aka refinancing, can be a lot less overwhelming and well worth it.
“In fact, avoiding the mortgage fidelity tax by refinancing regularly can have a huge impact on your savings.”
For a $500,000 mortgage, Gilfillan said the additional interest savings equaled $91,000 on a 30-year home loan.
Gilfillan also recommended people with a clearing account to make the most of it.
“Be sure to use your clearing account as much as possible, as the benefit may be higher than having balances in the transaction account or savings account interest rates,” he said. -he declares.
He suggested people make a lump sum payment if possible.
“Every dollar counts towards reducing your loan principal, which significantly reduces the interest you’ll pay over the life of your home loan, especially when rates rise,” Gilfillan said.
“Just check with your lender if any fees apply to make additional repayments.”
Changing your refunds could also help, he added.
“By simply switching from monthly to semi-monthly payments, you will be contributing the equivalent of one additional monthly repayment per year, which may not be too noticeable to you, but can make a huge difference in the interest you pay during the life of the loan,” he said.
The RBA this month raised the cash rate target by 25 basis points to 2.85%.
Further increases are expected in the coming months as the country battles high inflation.
In the year to September, the CPI inflation rate was 7.3%, the highest in more than three decades.
Inflation is expected to peak at around 8% later this year.
“The board expects to raise interest rates further over the coming period,” RBA Governor Philip Lowe said this week.
“He closely monitors the global economy, household spending and wage and price setting behavior.
“The magnitude and timing of future interest rate increases will continue to be determined by incoming data and the board’s assessment of the outlook for inflation and the labor market.
“The board remains steadfast in its determination to bring inflation back to target and will do what is necessary to achieve this.”
BASE VARIABLE INTEREST RATES OFFERED BY THE BIG FOUR BANKS:
- ABC — 4.44%;
- NAB — 4.49%;
- ANZ — 4.44%; and
- Westpac — 4.24%.
* Each bank has different terms in their respective packages. Small lenders also offer comparable rates.