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Author: Josh Swetnam

Give yourself a rate cut and reduce your loan term

The 0.25% interest rate cut by the Reserve Bank on Melbourne Cup day was welcome news for many people with a variable rate home loan. Our Belmont Branch Manager, Josh Swetnam, talks about how some borrowers can save even more than just a 0.25% reduction.

The first reduction in official interest rates for more than two years was indeed welcome news for borrowers. It has already led to an improvement in consumer sentiment.

Imagine how much better a borrower would feel if they could reduce their rate by more than 0.25% and significantly shorten their loan term?

Switch to the Greater

If your loan is currently with a major bank, chances are you can do that by switching your loan to the Greater.

Our standard variable home loan rate is 7.05% (comparison 7.09%), which is more than half of one percent (0.56%) lower than Westpac’s and almost 0.50% lower than the average of the big four banks.

The gap widens when you compare the true rate or comparison rate. Switching can not only give you a better rate but you can save on fees and charges as well.     

 

Basic

variable

Basic variable

Comparison Rate*

Standard

variable

Standard variable

Comparison rate*

Greater

6.69%

6.73%

7.05%

7.09%

Westpac

6.91%

7.25%

7.61%

7.74%

NAB

6.97%

7.01%

7.47%

7.60%

CBA

6.86%

6.86%

7.56%

7.70%

ANZ

6.85%

6.85%

7.55%

7.60%

*Comparison rate is on a $150,000 loan over 25 years.

The 0.49% difference between the Greater and average of the major banks on a 30 year, $300,000 standard variable home is significant – the major bank customers on average are paying $99 a month more than a Greater customer.

Many people are electing to have a basic variable home loan. The Greater’s Great Rate Home Loan (basic variable) is 6.69% or 0.20% lower than the average of the big four banks.

There are big differences in home loans, so it pays to shop around.

Keep your repayments at existing levels

The cost of living is an issue for many families – rising electricity and other charges are hurting people’s budgets - so a cut in your home loan repayments can certainly help.

But if you can afford to, keep your repayments at the same level you have been paying when rates drop. That way you are effectively paying off extra on your home loan. This has a positive, compounding effect on your loan in saving you interest and repaying your loan faster.

Say you had a $300,000 loan over 30 years at 6.94%. You’d have repayments of $992 a fortnight. The rate comes down by 0.25% so your repayments are $967. If you keep your repayments where they were you’ll be paying an extra $25 off your loan each fortnight and that would cut the time of your loan by up to  7 ½ years.

A lower interest rate is one way you’ll save money, but combine it with some smart management of your repayments and you’ll really see the benefits.

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