The latest analysis by comparison site Mozo found
that principle and interest loans are 68 basis points below those paying
interest-only loans.
With the Reserve Bank shaving 50 basis points off
the official cash rate since March and access to a wholesale interest rate of
0.25 percent, lenders have room to move when it comes to attracting the type
of customers they want.
The comparison site highlighted that with
record-low interest rate (50 basis points being shaved since March) banks
have plenty of wiggle room.
"If you’re living in your home and you are in a
position to pay principal and interest, the banks want you on their loan
books” said Mozo director Kirsty Lamont.
Mozo found that the leading variable home loan
interest rate for an owner-occupier paying principal and interest is 2.19 per
cent, 168 basis points below the average interest-only rate.
"The numbers show the banks are sending a clear
message to home loan customers, pay your principal and you’ll be rewarded with
a great rate,” Ms Lamont said.
"With the financial pressures caused by COVID
putting mortgage-holders and house prices under pressure, if you can afford to
pay the principal, comparing what’s on offer and banking a rate down
around 2 percent will ultimately leave you in a better financial
position.”
On an average $400,000 variable home loan, an
owner-occupier paying principal and interest could save $92,575 over the life
of their loan by switching to the most competitive rate.
It’s a similar story with fixed home loans, with
the lowest average one-year fixed loan for owner-occupiers paying principal and
interest coming in at 2.54 percent 54 basis points below those paying
interest-only.
Changing rates
Separate research by RateCity found that 43 per
cent of Australian mortgage-holders are looking to refinance to a better rate,
taking advantage of a record-low cash rate.
By comparison, a survey conducted by RateCity in
2018 revealed that 19 percent of borrowers were looking to refinance,
following the banking royal commission. That’s more than double in just two
years.
Sally Tindall, research director at RateCity,
highlighted that mortgage-holders are no longer tolerating overpaying for their
mortgage.
"The loyalty tax gets worse the longer you stick
with your bank.
"It’s taken a pandemic to get people to shift their
mindset, but hopefully we’ll come out of it more budget-conscious and less
complacent towards our mortgages,” she said.
Ms Tindall highlighted that the large financial
institutions are willing to fight for consumers, meaning mortgage-holders can
take advantage.
"The banks are pulling out all the stops, too,
putting some of the biggest cashback offers and rock-bottom rates on the table
and adding more flexibility on fixed-rate loans to attract new business – and
it is working.”
If you are looking to get a lower interest rate or just see what is available, We are here to help and is 100% free to find out
Just email jason@realrenta.com and I will organise someone to give you a call to chat
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Article Source
https://www.smartpropertyinvestment.com.au/finance/
Jason Gwerder
Monday, 10 August 2020