You may be surprised to see that some banks have lowered interest rates on home loans. While there’s often a problem, here’s why you should pick up the phone.
These are the words that many Australians right now would love to hear: your bank is lowering interest rates.
You may have recently seen reports of banks lowering variable rates on home loans, often not long after they were raised as a result of the Reserve Bank of Australia’s official cash rate hike.
Commonwealth Bank on Thursday lowered its lowest variable rate by 0.15 percent, ME Bank also reduced some of its variable rates on Tuesday, Macquarie Bank reduced variable rates on home loans to 25 basis points a week past and ANZ made a similar move in May.
But RateCity research director Sally Tindall warns there is a problem.
“The big problem with these rate cuts is that they are usually reserved for new customers,” he told news.com.au.
“What these cuts show is that competition in the variable home loan market continues to be as intense as ever, despite RBA’s cash rate hikes.”
If you are an existing customer of one of these banks, you may be disappointed to learn that a better rate is offered to new customers. But Mrs. Tindall has some tips for you.
“If your bank offers lower rates to new customers, pick up the phone and ask them where their loyalty is,” he said.
“If they don’t move, it might be time to pick up your mortgage and take it to a lender willing to offer you a competitive price.
“If you have a variable rate that is on the rise, you can take steps to minimize the damage by refinancing a more competitive lender.
“Most floating rate customers are now facing significantly higher depreciation, with more increases in the coming weeks.
“However, customers willing to buy their home loans can get a rate cut to help soften the blow.”
The Reserve Bank of Australia raised the official cash rate by 50 basis points in June, following a 25 basis point increase in May.
A third consecutive rate hike is expected next Tuesday, after the RBA board holds its July meeting.
Homeowners had little consolation when RBA Governor Philip Lowe recently told a UBS roundtable in Zurich that it would not be as big as many feared, claiming an increase of 0.75 percentage points “not on the table” this time. .
The RBA will continue to raise the cash rate in the coming months to curb inflation.
After the first rise in the RBA’s cash rate in May, Macquarie’s head of global strategy, Viktor Shvets, said he believed central banks would consider cutting rates again in 12 months.
“My view for some time was that as we move through 2023 and 2024, there is a much higher probability of loosening fiscal and monetary policies than of tightening,” he told the Macquarie Australia Conference. according to the Financial review.
“What will happen is that when the Federal Reserve begins to harden, through quantitative tightening and rate hikes, and rates are getting closer and closer to neutral rates, asset price volatility will increase substantially. .
“When that happens, the index of financial conditions will go through the ceiling and at that point, inflation and growth rates will start to go away and the Federal Reserve will have no choice but to back down.”