Do you know your current mortgage interest rate? Interest rates are a big factor in the total cost of a loan, so staying on top of your current rate as well as the interest trends across the market is important.
By staying on top of interest rates, borrowers can make informed decisions about their loan whether for refinancing or purchasing real estate.
Interest rates are set by lenders based on several factors: the Reserve Bank, the cost of money on overseas markets, and the general state of the economy. Interest rates don’t appear to move by much when looked at as a simple number, sometimes only a fraction of a percent (referred to as a basis point, which is equal to 0.01%), but each basis point makes a difference to the total cost of a loan and makes a big difference when you’re working to pay down your mortgage.
When you apply for your home loan, you typically have the option to fix or use a variable interest rate. A fixed-rate does not change over a set period of time, and your payments will be predictable for each pay cycle. On the other hand, a variable rate is linked to the market interest rate and will move up and down with the market.
With the recent RBA reduction of 0.15%, to a new all-time low of 0.10%, what does this mean for your home loan and repayments? Has your bank passed on a rate drop? As a reference, fixed rates are in the high 1% and low 2%, while your variable rate should typically be sitting around the mid 2%.
Why pay more in interest when this could be used towards making additional repayments to your loan or extra cashflow savings in your bank account.
If you need some help with your research, feel free to reach out and we can assist you.